Don’t Mistake the Pause for the End

By Lucas Downey

Listen to the audio version of this article (generated by AI).

 

Every big build has a moment when the cranes suddenly stop. 

From the sidewalk, nothing’s happening. It looks like the project stalled or got scrapped altogether. 

But step inside the fence, and it’s a different story. Permits are being finalized. Materials are getting staged for the next phase. Crews are regrouping before the next push. The build hasn’t slowed down at all – it’s just quiet for the moment. 

That’s exactly where AI stocks sit right now. 

After a blistering run, AI stocks have pulled back hard in the last few weeks. Some of the biggest names in the space are down double digits from their highs. It’s understandable if that makes you a little nervous. 

But here’s what the sensational headlines are missing: A stock cooling off is not the same thing as the buildout cooling off. The actual physical infrastructure of the AI boom – the data centers, the networking gear, the compute power – isn’t slowing down one bit. If anything, it’s ramping up. 

Prices got ahead of themselves. The fundamentals didn’t. 

Recently, we got what might be the clearest confirmation yet that the AI buildout is nowhere near finished. Tower Semiconductor (TSEM) – a chipmaker for trends like electric vehicles, 5G infrastructure, medical devices, and industrial automation – announced a major expansion into silicon photonics with ambitious revenue targets for 2028. And ASML Holding (ASML) reported blowout Q2 earnings and raised its full-year guidance well above what Wall Street was expecting.  

The AI pullback is the kind of moment we want to lean into, not step back from. 

Three additions to the TradeSmith Investment Report model portfolio – Jabil (JBL), Corning (GLW), and Marvell Technology (MRVL) – were all caught in the recent volatility. That doesn’t mean they are bad trades. In fact, they are even better buys in the current pullback. 

All three are essential to making the AI buildout physically happen. And all three are lighting up the Quantum Edge system right now. 

Jabil (JBL) 

Jabil is what’s called a contract manufacturer. The world’s biggest tech companies – like Apple, Amazon, Microsoft, and hundreds of others – design their products and then hire Jabil to make them. 

We’re talking servers, networking equipment, cooling systems, medical devices, robotics hardware, and more. If it requires sophisticated engineering and precision manufacturing at scale, chances are Jabil has a hand in building it. 

In late 2023, JBL repositioned itself to focus on AI infrastructure, healthcare, and robotics. 

It was the right move at the right time. The AI data center buildout was kicking into overdrive, and someone had to build all that hardware – the world’s biggest tech companies are increasingly turning to Jabil to do it. 

We added JBL to the Investment Report portfolio in May. Shortly after, our system picked up two Big Money buy signals, and the stock gained momentum.  

You can see in the chart above that shares fell in tandem with other AI stocks in mid-to-late June. But it’s important to note that the system did not pick up any outflow signals in that time. 

Jabil is below our buy limit of $360.20 and remains a great opportunity to buy a great stock on a pullback. The company has a rock-solid present and an even more exciting future in this AI buildout. 

Corning (GLW) 

Corning is a fiber optics and photonics giant that keeps AI data running. In May, Nvidia (NVDA), the most well-known and influential AI company in the world, announced a multiyear commercial and technology partnership with Corning. The goal is to expand U.S. manufacturing of advanced optical connectivity products for next-generation data centers. 

We joined Nvidia in its investment in GLW and added the stock to the Investment Report model portfolio in June.  

Shares are up nearly 200% in the last year, including a 30% pullback in the recent AI volatility.  

For fiscal 2028, sales for its Optical Communications segment have been revised higher to just over $14.5 billion, a 73% increase from 2026’s $8.36 billion estimate. This points to massive long-term tailwinds in AI infrastructure, where growing demand requires significant fiber-optic upgrades and advanced connectivity in data centers. 

That, combined with the recent pullback, makes GLW an even more compelling buy right now. Shares are trading below our buy limit of $209. 

Marvell Tech (MRVL) 

Marvell makes the chips that turn electrical signals into light, send it down the line, and turn it back into something a computer can use on the other end.  

It’s already a leader in optical chips. That’s part of why Nvidia put real money behind Marvell earlier this year, investing $2 billion in the company and making Marvell a key partner in its NVLink Fusion ecosystem. 

In its latest quarterly report, Marvell posted record revenue of $2.74 billion, up 37% from a year ago. Data center led the way, hitting a record $2.17 billion — up 46% from last year and 18% from just the previous quarter. That segment now brings in 79% of sales, up from about three-quarters a year ago. 

Here’s what really jumps out: Management expects growth to speed up as the year goes on — and it just raised its outlook for the second straight quarter, lifting both fiscal 2027 and fiscal 2028. Marvell now sees roughly $12 billion in sales this fiscal year (which ends January 2027), about 45% growth, with data center revenue on track to climb around 60%. 

MRVL’s Technical Score has pulled back since we added it, but those high-quality fundamentals haven’t budged. Marvell remains a buy up to $273.  

The AI buildout isn’t slowing, and I expect earnings season will continue to confirm it. The recent profit-taking and usual low summer volume give us the perfect opportunity to invest in companies that are essential to AI infrastructure.  

Earnings Season Is Wrapping Up Strong 

The TradeSmith Investment Report portfolio has had a solid earnings season this time around. Two the first companies who reported are smack dab in the middle of the AI trade and confirmed that things aren’t slowing down. 

ASML Holding (ASML) announced results that topped expectations across the board and raised 2026 guidance for the second time this year.  

  • Revenue of €9.3 billion beat estimates of €8.8 billion, up about 21% year over year.   
  • The Dutch semiconductor equipment maker now expects 2026 revenue between €43 billion and €45 billion, well above analysts’ estimates and above the high end of its previous guidance. 
  • ASML is up 66% since we added it a year ago, and the Quantum Score is a strong 85. Continue to hold for even more growth. 

Taiwan Semiconductor (TSM) announced record quarterly revenue driven by strong AI chip demand. 

  • Revenue of $40.2 billion topped expectations and increased 36%. 
  • The company expects its third-quarter revenue to grow 37% to between $44.6 billion and $45.8 billion. 
  • TSM raised its full-year 2026 revenue growth outlook to slightly above 40%, up from its previous 30% forecast. 
  • Management also announced it will invest an additional $100 billion in Arizona to meet strong customer demand, bringing its total investment in the state to $265 billion. 
  • Our shares are up 91%, and the Quantum Edge system picked up eight Big Money buy signals so far this year.  

Zoom out, and the picture is simple: the stocks took a breather, but the buildout behind them never did. That’s exactly why I’m treating this pullback as an invitation — a chance to own the companies laying the physical foundation of AI while the crowd is looking the other way. 

Until next time,

Lucas Downey   
Senior Analyst, TradeSmith Investment Report