The Next AI Stock Ready for Takeoff

By TradeSmith Research Team

Listen to this post

It’s officially bull season.

Yes, you read that right. Even with stocks up 12% this year… and despite last week’s volatility… bull season begins NOW.

We’ve been pounding the table all year long that late May through July has historically been a tremendous time to ride the markets higher.

Given such a monumental time of year, I thought it would be a great idea to lay out a bullish thesis on an AI play that’s definitely under the media’s radar.

Truthfully, much of the AI chatter we’re hearing on company earnings calls is full of hype and hot wind.

Not this company.

Similar to how we outlined KLA Corp. (KLAC) as a great picks-and-shovels AI play – up over 9% since we wrote about it – today we’ll dive into why this new bloomer started taking off and why it should continue.

Even better, I’ll share one metric to watch so you can know when a top-notch company is ready for blastoff…

One “Cool” Way to Play the AI Craze

Whenever you hear the words “artificial intelligence,” understand that a big part of what you’re hearing is simply “big data set.”

Think about it. Large language models trawl through endless pieces of data to spit out the best picture, answer, or solution to a query. And as systems get more and more complex, the data needs only increase.

With the need for more data comes the need for bigger and more efficient data centers. And that’s where Vertiv Holdings (VRT) comes into play. They’re in the business of all-in-one data-center needs like power, cooling, and monitoring.

I’m sure you’ve seen movies with companies using huge racks to organize and house server equipment. That’s exactly what Vertiv is all about.

Data needs are gaining momentum. And so is this company’s stock price.

Incredibly, the shares are up 117% in 2024. Even more eye-popping is the 500% one-year surge:


But VRT is a whole lot more than a gorgeous chart.

What seals the deal for me is the profit picture…

And that leads me to the one data point every smart investor should get excited about…

VRT’s Secret Sauce in One Simple Number

By now you probably know that I got my start on Wall Street handling large institutional order flow.

During that time, I had countless conversations with respected portfolio managers.

What I learned through those invaluable conversations is one of the strongest signals suggesting a stock is ready to advance: profit acceleration. In layman’s terms, that’s when a company’s bottom line is expanding quickly.

That’s exactly the case with Vertiv. As large-scale data needs are heading nowhere but up, sales are rising rapidly.

In 2020, annual sales stood at $4.37 billion. Revenues ballooned to $6.86 billion in 2023 and are estimated to hit $8.64 billion in 2025.

But the net income – what’s left over after doing business – is what’s causing the stir in the stock.

In 2021, net income stood at $120 million and nearly tripled to $460 million in 2023. Then for this year (2024 estimates), net income is set to double, coming in at $920 million.

This is the acceleration in profits that cues smart money managers to jump into a stock.

Below are the annual revenue and net income figures for Vertiv – it’s a healthy picture of growth:


As promised, the single data point you want to zero in on is net income growth as a percentage of revenues.

Let’s stay with Vertiv as the example. Using 2022 figures we see that $76.6 million in net income represents 1.34% of annual revenues ($76.6 million divided by $5.69 billion).

In 2023, the ratio jumps to 6.7%. In 2024, it’s set to climb to 11.98%, and in 2025 it clocks in at 14%.

Ladies and gentlemen, this is a great way to see if margin is increasing as business takes off. It’s a beautiful litmus test for a solid potential business model.

And if you’re looking to really fast-track your analysis, my go-to data point for awesome companies is the Quantum Score.

That’s Jason Bodner’s proprietary measure of a stock’s fundamentals, technicals, and institutional money flows.

This green reading indicates that the company has stellar fundamental and technical attributes, forming one easy-to-understand ranking:


The overall 77.6 Quantum Score is the key, indicating a green light. The fundamental portion comes in strong at 70.8, and the Technical score also tells a positive story with an 82.4 rating.

Look, there’s a lot of AI fluff out there. Understanding the full fundamental and technical backdrop is paramount.

Big institutions drive share prices. And they search for companies getting more profitable year after year. The Quantum Score helps you find those few golden needles in a haystack of empty AI promises.

There will be a handful of true AI winners over the years. Signs are pointing to Vertiv being one of them.


Lucas Downey
Contributing Editor, TradeSmith Daily