Fed Rate Hike Sparks Recovery in AI-Related Stocks
The Federal Reserve's recent interest rate hike and forward guidance have created uncertainty in the market. However, some stocks that were heavily affected by the slowdown in AI-related industries are now showing signs of recovery.
Generac (GNRC) is one such stock that has surged after announcing a long-term supply agreement with Amazon (AMZN). The deal includes 2.4 billion generator deliveries for Amazon's data centers in 2027 and 2028. This order from Amazon indicates that these companies are still performing well.
Steven Cress, the head of quant at Seeking Alpha, notes that many AI-related stocks were heavily hit starting in May and June, but have since recovered. He attributes this to valuation compression and the validation of orders coming in. According to Cress, Generac's year-over-year numbers don't look great, but some board numbers already show improvement.
Cress also highlights Powell (POWL), another industrial company that benefits from providing supplies and infrastructure to data centers and utilities. Similar to Generac, Powell has been hammered since June, but its forward revenue growth is 13.5%, and EPS growth is 18.5%. The revisions for Powell are C, indicating a potential buy.
Celestica (CLS) is another stock that has seen significant gains in trading this morning. It's up almost 5% after being hit hard since June. These stocks were also up yesterday when the Dow was down 1%, indicating a vote of confidence that valuation compression has largely been baked into the stocks.