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3 Top-Ranked AI Stocks Holding Up Despite the Selloff
The AI trade has experienced some extraordinary volatility in recent weeks, with sharp selling across semiconductors, infrastructure providers and many of the market's former leaders.
The correction has raised questions about the next phase of the AI boom. While investment in artificial intelligence continues to grow, investors appear increasingly concerned about valuations, capital spending and whether the stocks that led the previous rally can continue outperforming.
I think there is a reasonable possibility we are entering a more challenging market environment. However, that doesn't mean investors should abandon AI stocks altogether.
In fact, periods of market weakness can help identify the strongest opportunities. Stocks that hold up relatively well while their peers suffer sharp declines often deserve closer attention, particularly when that price strength is supported by improving fundamentals.
Three stocks worth highlighting are Arista Networks ((ANET - Free Report) ), Zeta Global ((ZETA - Free Report) ) and Littelfuse ((LFUS - Free Report) ). Each offers exposure to a different segment of the AI boom, with strong earnings momentum, favorable analyst revisions and technical setups worth watching.
Image Source: Zacks Investment Research
Arista Networks: AI Networking Demand Remains Strong
Arista Networks is a leading provider of high-performance networking equipment and software used in data centers, cloud infrastructure and increasingly complex AI computing systems.
As AI clusters expand, the networking infrastructure connecting thousands of processors becomes increasingly important. Arista is a major beneficiary of this trend, particularly as Ethernet networking gains adoption across AI data centers.
The company's latest earnings report demonstrated just how strong demand remains.
Third-quarter revenue surged 58.5% year over year to $3.66 billion, exceeding management's guidance of $3.3 billion. Adjusted earnings rose to $1.20 per share from $0.77 a year earlier, while adjusted operating margin reached an impressive 49.1%.
Looking ahead, management expects continued rapid expansion in AI networking, with AI-related revenue projected to double to approximately $7 billion in 2027.
Analysts have responded by unanimously raising their earnings estimates across timeframes, supporting Arista's Zacks Rank #1 (Strong Buy).
With exceptional revenue growth, strong profitability and rising earnings estimates, Arista remains one of the more compelling businesses within the AI infrastructure industry.
Image Source: Zacks Investment Research
Zeta Global: AI Adoption Drives Accelerating Growth
Zeta Global offers a different way to participate in the AI boom, focusing on the application of artificial intelligence rather than the infrastructure required to build it.
The company operates an AI-powered marketing and customer intelligence platform, helping businesses analyze consumer data, identify customers and automate marketing campaigns.
Its Athena AI platform has become an increasingly important growth driver, as companies look to integrate artificial intelligence into their everyday operations.
The latest earnings report was particularly impressive.
Third-quarter revenue surged 46% year over year to $493 million, while adjusted earnings reached $0.38 per share. Adjusted EBITDA increased 55% to $121 million, and free cash flow jumped 73% to $82 million.
The company also reported positive GAAP net income of $38 million and raised its full-year revenue outlook to approximately $1.86 billion, representing expected growth of 42%.
Importantly, the company has now delivered 21 consecutive quarters of beating expectations and raising guidance.
Analysts have responded enthusiastically, with current year earnings estimates climbing 8.2% over the last week, earning Zeta a Zacks Rank #1 (Strong Buy).
With accelerating AI adoption, expanding profitability and sharply rising earnings estimates, Zeta offers an interesting opportunity as the AI boom broadens beyond infrastructure spending.
Image Source: Zacks Investment Research
Littelfuse: AI Infrastructure Supports Earnings Growth
Littelfuse is another beneficiary of AI infrastructure spending, although its business differs considerably from the more familiar semiconductor and networking companies.
The company develops circuit protection, power control and sensing technologies used across electronics, industrial equipment, transportation and electrical infrastructure.
These components are essential for managing electricity safely and efficiently, making them increasingly important as data centers become more power-intensive.
Littelfuse also benefits from industrial automation and electrification, providing additional growth opportunities beyond AI.
The company's latest results were exceptionally strong.
Third-quarter revenue reached a record $767 million, up 23% year over year, with organic growth contributing 22%. Adjusted earnings surged 96% to $5.79 per share, while adjusted EBITDA margin expanded 690 basis points to 28.4%.
Free cash flow also climbed 64% to $216 million, reflecting substantial improvement in operating performance.
Looking ahead, analysts expect earnings to increase approximately 72% this year, alongside projected revenue growth of roughly 25%.
The strong results and favorable estimate revisions have earned Littelfuse a Zacks Rank #1 (Strong Buy).
With sharply improving earnings and exposure to several long-term industrial growth trends, Littelfuse offers a differentiated way to participate in the continued expansion of AI infrastructure.
Image Source: Zacks Investment Research
Should Investors Buy ANET, ZETA and LFUS?
The recent correction has made it clear that investors are becoming more selective about AI stocks. However, that same volatility can help distinguish potential leaders from weaker names.
Arista Networks, Zeta Global and Littelfuse have all delivered impressive operating results, with favorable earnings revisions supporting their top Zacks Ranks.
If their relative price strength continues as the broader market stabilizes, these three stocks could be among the more attractive opportunities for investors looking to maintain AI exposure in a changing market environment.
View the Zacks #1 Rank List
Image: Bigstock
3 Top-Ranked AI Stocks Holding Up Despite the Selloff
The AI trade has experienced some extraordinary volatility in recent weeks, with sharp selling across semiconductors, infrastructure providers and many of the market's former leaders.
The correction has raised questions about the next phase of the AI boom. While investment in artificial intelligence continues to grow, investors appear increasingly concerned about valuations, capital spending and whether the stocks that led the previous rally can continue outperforming.
I think there is a reasonable possibility we are entering a more challenging market environment. However, that doesn't mean investors should abandon AI stocks altogether.
In fact, periods of market weakness can help identify the strongest opportunities. Stocks that hold up relatively well while their peers suffer sharp declines often deserve closer attention, particularly when that price strength is supported by improving fundamentals.
Three stocks worth highlighting are Arista Networks ((ANET - Free Report) ), Zeta Global ((ZETA - Free Report) ) and Littelfuse ((LFUS - Free Report) ). Each offers exposure to a different segment of the AI boom, with strong earnings momentum, favorable analyst revisions and technical setups worth watching.
Image Source: Zacks Investment Research
Arista Networks: AI Networking Demand Remains Strong
Arista Networks is a leading provider of high-performance networking equipment and software used in data centers, cloud infrastructure and increasingly complex AI computing systems.
As AI clusters expand, the networking infrastructure connecting thousands of processors becomes increasingly important. Arista is a major beneficiary of this trend, particularly as Ethernet networking gains adoption across AI data centers.
The company's latest earnings report demonstrated just how strong demand remains.
Third-quarter revenue surged 58.5% year over year to $3.66 billion, exceeding management's guidance of $3.3 billion. Adjusted earnings rose to $1.20 per share from $0.77 a year earlier, while adjusted operating margin reached an impressive 49.1%.
Looking ahead, management expects continued rapid expansion in AI networking, with AI-related revenue projected to double to approximately $7 billion in 2027.
Analysts have responded by unanimously raising their earnings estimates across timeframes, supporting Arista's Zacks Rank #1 (Strong Buy).
With exceptional revenue growth, strong profitability and rising earnings estimates, Arista remains one of the more compelling businesses within the AI infrastructure industry.
Image Source: Zacks Investment Research
Zeta Global: AI Adoption Drives Accelerating Growth
Zeta Global offers a different way to participate in the AI boom, focusing on the application of artificial intelligence rather than the infrastructure required to build it.
The company operates an AI-powered marketing and customer intelligence platform, helping businesses analyze consumer data, identify customers and automate marketing campaigns.
Its Athena AI platform has become an increasingly important growth driver, as companies look to integrate artificial intelligence into their everyday operations.
The latest earnings report was particularly impressive.
Third-quarter revenue surged 46% year over year to $493 million, while adjusted earnings reached $0.38 per share. Adjusted EBITDA increased 55% to $121 million, and free cash flow jumped 73% to $82 million.
The company also reported positive GAAP net income of $38 million and raised its full-year revenue outlook to approximately $1.86 billion, representing expected growth of 42%.
Importantly, the company has now delivered 21 consecutive quarters of beating expectations and raising guidance.
Analysts have responded enthusiastically, with current year earnings estimates climbing 8.2% over the last week, earning Zeta a Zacks Rank #1 (Strong Buy).
With accelerating AI adoption, expanding profitability and sharply rising earnings estimates, Zeta offers an interesting opportunity as the AI boom broadens beyond infrastructure spending.
Image Source: Zacks Investment Research
Littelfuse: AI Infrastructure Supports Earnings Growth
Littelfuse is another beneficiary of AI infrastructure spending, although its business differs considerably from the more familiar semiconductor and networking companies.
The company develops circuit protection, power control and sensing technologies used across electronics, industrial equipment, transportation and electrical infrastructure.
These components are essential for managing electricity safely and efficiently, making them increasingly important as data centers become more power-intensive.
Littelfuse also benefits from industrial automation and electrification, providing additional growth opportunities beyond AI.
The company's latest results were exceptionally strong.
Third-quarter revenue reached a record $767 million, up 23% year over year, with organic growth contributing 22%. Adjusted earnings surged 96% to $5.79 per share, while adjusted EBITDA margin expanded 690 basis points to 28.4%.
Free cash flow also climbed 64% to $216 million, reflecting substantial improvement in operating performance.
Looking ahead, analysts expect earnings to increase approximately 72% this year, alongside projected revenue growth of roughly 25%.
The strong results and favorable estimate revisions have earned Littelfuse a Zacks Rank #1 (Strong Buy).
With sharply improving earnings and exposure to several long-term industrial growth trends, Littelfuse offers a differentiated way to participate in the continued expansion of AI infrastructure.
Image Source: Zacks Investment Research
Should Investors Buy ANET, ZETA and LFUS?
The recent correction has made it clear that investors are becoming more selective about AI stocks. However, that same volatility can help distinguish potential leaders from weaker names.
Arista Networks, Zeta Global and Littelfuse have all delivered impressive operating results, with favorable earnings revisions supporting their top Zacks Ranks.
If their relative price strength continues as the broader market stabilizes, these three stocks could be among the more attractive opportunities for investors looking to maintain AI exposure in a changing market environment.