July's top three AI favorites from investment research firm Zacks did without Nvidia. The focus shifted to stocks of companies that provide the technological basis for neural networks. The list includes Vertiv, TSMC, and MYR Group: suppliers of the advanced chips, hardware, and power that the AI revolution needs.

Vertiv: supplier of «picks and shovels» for AI

Over the past three years, Vertiv's stock is up 1445% - more than its partner Nvidia (990%). The company provides cooling and power systems for data centers where neural networks are deployed and trained. Its solutions will be in demand no matter who becomes the leader in commercializing AI technology. Zacks calls Vertiv a maker of «picks and shovels» for AI. It's a gold rush analogy: those who sold the tools often made more money than the miners themselves.

Even after growing 15 times in three years, Vertiv stock is trading 16% below its all-time highs and with a valuation 33% below the average for the tech sector as a whole, Zacks says. The outlook for 2025 is for revenue growth of 19% and earnings growth of 25%. Vertiv stock has a Zacks #2 (Buy) rating.

TSMC: one of the best AI stocks for years to come

TSMC produces the most advanced chips in the world. The company operates exclusively as a contract manufacturer, not competing with its customers Apple and Nvidia. TSMC controls about 60% of the global contract manufacturing market and 90% of the advanced chip segment. The stock is up 2,600% over 20 years - more than tripling the technology sector.

TSMC has consistently exceeded analysts' forecasts and has a Zacks #2 (Buy) rating. From a technical perspective, the stock may be overheated - the stock hit an all-time high in June. But their current valuation is 33% below the peak and 18% cheaper than the sector. For long-term investors, it's wise to get into TSMC stock now, considers Zacks. Another option is to wait until July 17, when the world's largest contract chip maker releases its quarterly report. 

MYR Group: an unassuming beneficiary of the AI infrastructure boom

MYR Group builds and maintains energy infrastructure: power grids and charging stations. The company is benefiting from two megatrends: rising energy consumption due to AI and the need to modernize energy infrastructure in the US after decades of underinvestment. After temporary difficulties, MYR returned to growth in 2024: earnings guidance for 2025 is +260%. A strong first quarter of 2025 and improved earnings outlook has given MYR a Zacks #1 (Strong Buy) rating. Although MYR stock recently hit an all-time high, the current P/E multiple (the ratio of the stock's market price to expected earnings) is 20% lower than it was when the company's stock last peaked, underlines Zacks.

This article was AI-translated and verified by a human editor

Share