3 Stocks I’m Buying in the Stock Market’s Fake Crash

One day, AI stocks are in a bare market, crushing investors. Yesterday, they jumped 20%. That's the kind of whiplash investors get when fear outruns fundamentals. Instead of chasing headlines, I'm going to be explaining the biggest news of the week. Why stocks just went through a fake crash that makes smart investors rich and the three stocks I'm buying in the sell-off. I'll be covering three themes here. AI infrastructure stocks, highlighting analysis on Nvidia, AMD, Broadcom, Maravel, and Arista Networks. Then we're going to look at fintech stocks after a giant disappointment from SoFi Technologies, but ahead of what could be a buyout boom following PayPal's offer, which is the best buy in the group, including Coinbase, Robin Hood, a firm, and Block. Then I'm going to wrap it up with my favorite theme here, cyber security stocks. Blowout earnings by Fortnite that proved what I've been saying that an AIdriven sales boom is coming and you want to own these stocks. I actually want to start with those cyber security stocks because we just got news yesterday from the journal that that makes this even crazier than that that 20% pop in AI stocks yesterday. I know it's not as sexy as the AI infrastructure plays. We're going to get to those. But folks, you need to be paying attention to this news that we just got from cyber security stocks. I'm going to cover the five stocks I own as well as Cloudflare. Really don't consider Cloudflare, ticker NE, much of a cyber security stock anymore. It's more of an AI gateway play that I'll explain later here. But here we're gonna we're going to look at Palo Alto Networks ticker PW Crowd Strike CRWD Zcaler ticker ZS Octa OKTA and Fortnet FT NT. We're going to be comparing those against the analysis here and this news that just put this whole sector this whole industry into overdrive. We can see here in the five-day chart that big bump on Thursday after Fortnite reported its earnings brought a lot of investors back to this to this industry up almost 10% for Fortnite there. Zcaler got a got a 7% pump on the uh on the news here over the last year. a big jump in these shares just since uh just since a few months ago, just since February really we can see the sell-off since October, October, November, investors started to worry that the uh the AI was going to replace a lot of these software names. I was screaming that no, AI was going to be a sales boom to these companies and we got confirmation of that from Palo Alto Network CEO. I'm going to be talking about that in a little bit here and we've just seen these stocks explode higher. Palpo Alto Networks up 78% for the last year. Crowd Strike up 60%. Zcaler really the only lagard here down 48%. I still think there's some value left in there, but Zcaler definitely the most at risk of being replaced in that AI software apocalypse. Uh the rest of these going to get a big sales bump from it. Octa up 40%, Fortnet up 51% over the last year. that big news in the journal yesterday about anthropic AI models hacking three companies during tests folks and this is crazy when you read through it because what happened it follows uh it follows news that open AI some of its models broke out of its sandbox uh earlier what Anthropic did it went back and see to see if its its models were breaking out of their sandboxes as well and they were they didn't even know about this until about 3 months later so here it says the news comes one week after openai revealed built its technology. It broke it out of its testing sandbox. Now those sandboxes that's a digital prison as a like a virtual world. They put these models in to test against uh you know other data and other company or other other sites on the internet kind of test those models out but without being having the ability to break out into the further internet into other companies being able to hack other companies. What they found what Open AI found first uh a week ago was that yes its models had broken out of that sandbox. So here we have AI that is actually doing stuff it's not supposed to be doing. It's breaking out of its little digital prisons there hacking other companies. Here it hacked an AI company, HuggingFace. The Open AI incident rattled security researchers and AI professionals here where we have uh Okay, so Anthropic hacks. Anthropic actually went back and looked at checked the logs of 141,000 tests here. And this was months later after after it had happened. company discovered Claude had indeed found its way onto the internet several times and in three hacks it discovered actually hacked three companies. It's not releasing the what those companies were but it actually broke into the internet and hacked three companies. Folks, this is wild. This is what we've been saying over the last three months. This is that huge warning by the Palo Alto Network CEO that uh companies have three to five months before AI becomes a real security threat. So, three to five months. That was back in May. That was two months ago. We're already seeing it right now that companies need to get their their enterprise cyber security in check. They need to be paying some of these cyber security companies because AI is becoming Matthew Brick. And I'm not talking about the lovable rules breaking Ferris. I'm talking the little in the chair trying to hack his grades and play games that is inadvertently causing something bad to happen. We got further confirmation of that with Fortnite earnings. Again, Fortnite reporting revenue jumped 20%. This is a company that's growing much slower than a lot of the other cyber security companies. We're going to look at those fundamentals here in a little bit, but this is a company expected only to really be growing about 15% a year. Reported 20% sales growth because uh because companies are rushing to shore up their cyber security before this 3 to 5 year 3 to five month window closes and AI becomes a real threat to systems. Okay, this follows IBM the IBM CEO's warning that uh the IBM revenues were were lower because of a lot of clients. Here it says, okay, IBM helped embed the view of cyber security companies here when it said clients were distracted with rapidly evolving industry-wide cyber security concerns. Again though, I own every one of these five cyber security pure plays here. Palo Alto Networks Crowdstrike Zcaler Octa Fortnite. I think they're all going to do exceptionally well in this coming AI threat, but I'm only buying one. I want to go through the analysis with you here, show you which one I'm buying and why. But before that, let me just say I for one welcome our new robot overlords and would remind them that as a member of the media, I can be useful in rounding up others. Scrolling down here, what we want to look at first here is growth. We want to see which ones which of these companies are growing. Which one of these are leveraging that uh that coming AI threat into higher revenues for their for their cyber security companies. We can see here the big dogs the leaders in the group. Palo Alto Networks 20% growth expected over this next year. Crowd Strike a little bit higher at 22%. Crowd Strike the undeniable leader in the platforms there with its Falcon platform. It also has its Charlotte AI agentic cyber security system that is well above any any of the others. That's why we're seeing this growth here in Crowdstrike. Zcaler 21% here. Even though the the stock has been uh has been hit over worries about that AI software uh replacement here, still expected to grow 21%. So I think there is an opportunity there in Zcaler as a value play. Octa only growing 10% expected over the next year. Now Octa is uh really only in its one main theme there in cyber security that identity access and management. I think there's still an opportunity there though. We did see earlier in the year uh and last year that Palo Alto Networks actually made an acquisition of Cyber Arc security another cyber security in the identity access and management field. That company that cyber arc software only had about two to 5% market share of that identity access and management sector. Octa actually owns about 10 to 15% market share of that second only to Microsoft in that uh in that field. So I think Octa would have been a much better buy for Palo Alto. Regardless, I still think Octa gets a takeover offer at some point for its business because of that market share in identity access. It is a little bit slower growth, but it has a very strong competitive lead in that area. Fortnite here expected to grow 15% revenue over the next year. We did see it boosted that to 20% just uh just this week with its earnings report. So we do see the the winner here crowdstrike on growth a little bit higher growth at 22% Palo Alto Zcaler fairly close there with 20 21% growth. Now we want to look at profitability very important here and and very interesting for this group because we see the growth leaders here crowdstrike just 1% Ibodai margin that's going to be your core profitability metric. Okay, how well is management converting those rapidly growing sales into profits? And we see with a lot of these with Crowdstrike and Zcaler anyway, very low profitability because they're plowing so much of that money back into research and development into sales trying to grab that growing market share. We do see some of these others though. Why I like Palo Alto, not only is it growing at 20% a year uh revenue growth, it's also converting 14% of that into profits. Very strong. Fortnite though, you cannot deny. Fortnite is the undeniable leader in profitability for this group, only growing about 15 to 20% uh revenue growth a year, but converting more than a third of that into profits. So, very strong competitive advantage and why I own lots of shares of Fortnite here. But then to help us make a decision which one we want to buy now, we're going to look at valuation. So, getting a good stock at a great price here. What a lot of valuation metrics here. What we want to look at though is the PEG non-GAAP. Okay, this is the price to earnings to growth. So basically this is the price of the stock divided by the earnings that that company is generating. You know those those earnings are what an investor actually owns. So very important there. The price divided by the earnings that valuation but then adjusted for that growth. Okay. I would much rather pay a lot more uh on a price to earnings basis for a company growing its growing its revenue or earnings by 20 or 30% than a company not growing earnings so quite so quickly. So we want to adjust that price to earnings ratio that valuation by the growth and and get a valuation on that. Okay. So here we see Palo Alto Networks trading for about 5.7 times price to earnings to growth. Crowdstrike cheaper 5.3 times. Okay. And what's interesting here if you look up here you look at the PE ratio on these very high anyway but PE PaloAlto actually cheaper than Crowdstrike on a PE basis. So price to earnings only 86 times versus Crowdstrike 150 times. But when you adjust for that growth, when you adjust for the fact that Crowdstrike is growing its earnings faster than PaloAlto, Crowdstrike becomes the better better deal here at 5.3 times price to earnings. Zcaler the uh one of the one of the cheapest in the group here 1.5 times on a price to earnings to growth that adjusted valuation. It's after that 60 40% downside um over the last year that is getting very inexpensive and a very strong turnaround play. Octa again just not getting credit for having a controlling market share for that identity access and management uh segment of cyber security not growing as fast but very good value play here and Fortnite 2.9 times on a price to earnings to growth. So, what we saw here is not only is Fortnite surprising analysts, surprising investors with its uh faster growth, 20% growth over the last quarter, it's also still very attractively priced. So, here I would be adding shares of Fortnite. Even after that 10% pop after its earnings, it's still the the value play here. It's still the undeniable profitability leader and it's still growing its revenue commensurate with a lot of these others. Maybe not quite as fast as CrowdStrike or PaloAlto, but still growing its revenue very quickly. Next here, I want to look at fintech stocks because I think this is a group heading into what could be an M&A boom. Okay, mergers and acquisitions, a buyout boom following that announcement for PayPal just a couple of weeks ago. I'm going to talk about that here. We're going to talk about SoFi Technologies, ticker SFI, Coinbase Global, CO II N, Robin Hood Markets, H O D, Affirm AFRM, XYZ is block, and then PayPal holdings there, PYPPL. We're going to look at that that news for PayPal, why it could signal a buyout frenzy for a lot of these companies, as well as those really disappointing earnings by by SoFi. And we can see that news reflected on the five-day chart here over the last week. Wind SoFi did report that really disappointing earnings down 14% on that day. Dragged everybody down with it. Uh Robin Hood down 8% of firm holdings down 4.5% almost 5% on the news. Over the last year, this whole group has been under pressure a lot of from that AI software fears as well. SoFi down 25% over the last year. Coinbase down 56%. Robin Hood down 18%. A firm up just eight 8%. XYZ block there up 6%. PayPal down 17% even despite that offer, that buyout offer that sent its shares up about 20% on the news. A lot of these coming down as with with crypto prices as well. All these fintech names that were really deep into the into the crypto ecosystem trying to push those stable coins as well. But there is a giant contradiction in this market folks. SoFi reported its earnings on Wednesday thereafter the bell actually reported a blowout quarter 40% revenue growth there in its seg in its segment to $1.2 billion against analyst forecast of 1.1 billion. So easily beating analyst forecast there. Also revised its uh its forward expectation higher. Companies extended the company's guidance as SoFi lifted parts of it outlook on the back of the last quarter. Management is forecasting adjusted net revenue roughly 4.75 to 4.85 billion. That's 32 to 35% growth. Okay, show me a stock that that management is saying they're going to book 30 35% growth in revenue for the year and the stock falls 14%. Okay, that was against previous expectations of just $4.66 billion. So well above even the lowest part of that range, well above what the previous guidance was for 30% growth. So if I reiterating its adjusted earnings guidance to 60 cents a share, forecasts were just for 59 cents a share there. So not only is Revenue Book going to be growing, but it's upgrading its uh earnings expectations as well. We're going to look at the fundamentals for all of these, why I'm still buying SoFi stock, and which of these stocks I'm buying right now. But the big news here, it was a couple of weeks ago. Stripe mounting a blockbuster $53 billion offer for PayPal. I think this sets off a merger frenzy for some of these companies, for the companies in the fintech space. A lot of that creative destruction, a lot of those changes happening in this fintech space with a lot of them getting banking licenses. A lot of them moving into stable coins and other crypto uh crypto payments, things like that. A lot of changes happening in this group that are making them targets for consolidation for buyouts from larger banks. We did see here Stripe offered to pay pay to buy PayPal for $53 billion. That was a 28% premium over PayPal's most recent closing price. Now, a lot of investors have come out and said that it's just not enough. PayPal's still uh evaluating the offer. I think they may even get a higher offer on that or maybe somebody else comes in and tries to uh tries to be a white knight and tries to buy them away from Stripe. But definitely something that a lot of banks, a lot of a lot of uh industry leaders in the space are looking at for some kind of a merger boom. If that does happen, a lot of the stock prices for these going to be going up very fast because there is a lot of value trapped away in these. Let's go to the growth first. See that the growth is here. the 31% revenue growth for SoFi. Again, remember it affirmed that guidance for fullear growth around 32 to 35%. Coinbase a little bit slower there at just 5% a little bit more tied to the cryptocurrency uh ecosystem that is is faltering right now, but could be could be coming back. Robin Hood 30% growth on its revenue. Affirm 31%. So you see here the big the big three growers are SoFi, Robin Hood and Affirm doing very well despite those falling stock prices. We're going to come down here to profitability. Look at this net income margin. Okay, so this is the profitability the company has in its earnings. What percentage of sales, what percentage of revenue the company is converting into that net income into those bottom line earnings for investors. We can see here SoFi converting 15% of its revenue into earnings. Coinbase a little bit lower 12.7% Robin Hood 42% net income margin that is outstanding for a company they have very few costs there gross profit of 92%. Okay so Robin Hood running a very lean very efficient company 42% net income margin there a firm quite a bit lower 10% block at only 3.3% and PayPal at 14%. I want to use PayPal as the as really the benchmark for these because it did get that that buyout offer. If we see another company doing just as well or better than PayPal, maybe it gets a buyout offer as well. So, we want to look be looking at again those growth leaders, SoFi, Robin Hood, a firm looking at the profitability winners here. I'd say Robin Hood probably the the standalone for profitability in this space. Now, let's go back up to valuation. See which ones are the best price here. We're going to again be looking at that PEG, that price to earnings to growth of that adjusted ratio here. So 72, very inexpensive. Go here again looking at PayPal as our benchmark 1.5 times price to earnings to growth. So if PayPal received that buyout offer, somebody said, "Hey, PayPal has a competitive advantage in its space. We want to buy them. We want to add them onto our company. We're willing to pay 1.5 times on a price to earnings to adjusted growth." SoFi just 72. That basically means you could pay double for the shares of SoFi and still get a good deal in a buyout offer. So SoFi on this on that comparison could be worth twice of what it is right now. Coinbase not listed here. It doesn't have uh doesn't have the earnings to show. Robin Hood two times so is quite a bit more expensive. So you are paying for that growth. You are paying for that profitability. Affirm trading at just n3 times and block.84 times. that block really not showing the growth or the profitability there that I wanted to see. But here definitely SoFi very cheap on a on a valuation basis. A firm very cheap on a valuation basis.93. Robin Hood a little bit more expensive, but you cannot deny that growth and that profitability. I think I'd be picking up shares of Robin Hood right here. I think when crypto does come into its next boom cycle, you're going to see that stock go much higher. They've already got the profitability. So once that sales growth goes even higher with the uh with the next crypto boom whenever that eventuality is, you're going to see the earnings jump for this stock. And of course, what you've all been waiting for here, the AI infrastructure stocks, a lot of these falling into bare market territory over the last couple of weeks as those fears of of capital spending by the big hyperscalers come back into play. The worry here is that a lot of those hyperscalers, so you've got meta platforms, you've got Amazon, you've got Microsoft, the big cloud uh cloud drivers, you've got Oracle, they're building out those data centers. The worry is that those revenues for those hyperscalers aren't increasing fast enough. Not going to justify the big spending. They're they're paying for chips from Nvidia and AMD, for accelerators from Broadcom, for those memory chips from Micron, the accelerators from Marvel Technologies, and the networking for from Arista. The money just isn't going to be there. So, they're going to pull back on that capital spending, and that's going to pull the rug out from a lot of these stocks. And you can see the whiplash in these stocks just over the last week, stocks getting hit hard, and that initial fears that the uh the capex capex was going to slow down. Meta reported its earnings and actually increased its capital spending plans, but a lot of the the revenue growth, the earnings just weren't there. So, people still worried that it was uh it would later pull back on those capital spending plans. Then we got Microsoft, then we got Amazon reporting over the last couple of days shot these stocks much higher. You can see here over the year to date stocks, some of these still up over 200% for Micron, AMD up 126%, Marll 115%. Nvidia, the one that started it all, only up 4.5% over this year. So, we're going to see how it's doing. We're going to compare all the fundamentals after we look at what's really moving these in the news. Again, a lot of this started in the leadup to earnings and then just exacerbated with the meta with the meta platform earnings that showed revenue and earnings growth for that company for the hyperscaler was not meeting expectations. Investors just worried that all that capital spending, all that investment into these chip stocks into the memory stocks, things like that was going to slow down. We can see here that big tech stocks entered correction territory last Tuesday. Okay, 10% from the from the recent peak there in mid June. Then we heard from Microsoft though the earnings on that stock sending it up 15% actually the biggest market value increase in any company in a single day ever adding hundreds of billions of dollars onto the value of that stock and we can see why looking through its earnings as cloud services revenue up 40%. Okay, so that is the key segment of Microsoft that benefits off of this AI spending. Okay, it it's leasing out uh leasing out data centers to run its Asia cloud services there. Revenue going to that grew 40%. So very much a confirmation that uh Microsoft needs to be growing that as fast as possible. Its capital spending rose 70% last quarter. Okay, so the very capital spending, the very capex that investors are worried about that is going to slow down actually increased 70% for Microsoft. That sent a lot of those stocks well higher on that news. Then as if that wasn't enough, Amazon hikes its own capex to $220 billion on higher memory costs as well as growth in its own AWS platform. Again, AWS that cloud services from Amazon just like the Azure services for Microsoft that is the segment that uh that Amazon makes money off of the data centers the the cloud services it provides to companies and that AI spending boom expanded 37% year-over-year well above analyst expert estimates for 31% growth. So again here we have a company one of the major hyperscalers spending hundreds of billions of dollars on those AI infrastructure companies on those that equipment the hardware the software everything that goes into a data center recognizing 37% increase in its sales for that segment year-over-year and boosting its capital spending its investment into that for $220 billion. But against that growth and in all that fear over the last month, a lot of these stocks entering correction, even bare market territory, AMD down 16% over the last month. Nvidia down just 2 and a.5%. Broadcom, AVGO, able to keep with a 2.6% return. But Micron Technologies, ticker MU, the darling, the standout over the last year, down 24%. Marll ticker MRVL down 38%. Arista Network's able to hold on to a flat about 67% return over the past month. These stocks could be in deep value territory. Let's look at the growth. See which ones are worth picking up right now. And the revenue growth very much higher than we saw with some of those other segments. Nvidia expected to book 62% revenue growth. AMD lagging still at 45% but very respectable 45% revenue growth expected there. Broadcom 50%. Micron expected to double its revenue over the next year 111% Marll 42% Arista just 27% any other segment any other industry I would say that is excellent excellent revenue growth here it is the lagger of the four here in profitability I think this is one of the things that is really going to define the group and show you where the standouts are the profitability okay so this is again this is how much of those re how much of that revenue can management convert into earnings and and operational profits for investors. And what this means is is even more important here because it means that the company has those higher prices, can charge those premium prices and can get concessions out of its own suppliers to to be able to boost those earnings, those or those margins, that profitability. A lot big distinction here between AMD and Nvidia. Both of them's booking very strong revenue growth. But Nvidia with its technological advantage has a 65% EBIDA margin versus just 20% for AMD. Now AMD has lifted that margin quite a bit over the last year. That's why we were were investing in that stock just over the last year. Did very well on that. But you can still see just the the competitive advantage Nvidia has in its pricing in its relationship with buyers and suppliers. It is able to get so much more profitability compared to AMD there. AVGO, Broadcom doing just as well, 55% very strong profitability there. Micron 75%. We compare that to the 5-year average for Micron. Micron has lifted its profitability from just about 35% average over the last 5 years to 75% now. And what's that that that's in? That's in the prices for these memory chips. Memory chips are in such short supply. Micron has been able to lift those prices so much without lifting its own costs. It is now at a 75% EBIDA profitability margin there. Marll lagging a little bit with 31%. Arista Network's kind of the surprise here. Although it isn't growing sales quite as fast as these others, very strong profitability there. I think this is going to be one of the value plays of the group. Now, putting this all together with the valuation. We're going to look again at the PEG ratio, the price to earnings adjusted for growth. Nvidia at just 0.5 times price to earnings adjusted for growth. Of course, that is on the back of that very strong very strong uh earnings growth expected there. AMD 1.2%. So AMD more than twice as expensive as Nvidia for those shares. Okay, so AMD getting a little bit ahead of itself, getting a little expensive compared to some of these other stocks. Broadcom 7.7 times price to earnings adjusted for growth. So very strong, very strong valuation case for that. micron the least expensive and by a big margin here 07 times. Now, of course, that taking that you have to take take as a given that amazing growth for the uh for the sales and for the earnings for the stock. If something should happen to that memory chip segment to that memory chip market where those sales don't grow as fast, those earnings don't grow as fast, look out below because Micron is going to come crashing down. But if those sales and earnings expectations hold up for this stock, this stock is terrifically cheap and is the stock to buy right now. Marll pretty expensive here, 1.2. AET really disappointing here 2.3 times on that price adjust price to earnings adjusted for growth basis. I was hoping this was going to be a lot cheaper so I could buy more of that stock. Actually still still own it. I think it's one of the leaders in that networking uh technology that goes into a data center but I wouldn't be picking up new shares here. Here you cannot deny the valuation on Micron if you believe those uh that earnings and that sales growth is going to be anywhere near expectations. This is a cheap stock. I would actually also be buying Nvidia and Broadcom. Both of those selling very cheaply on that price toearnings valuation, growing those sales quicker than anyone there. And then that profitability is also putting them really ahead of this pack. Let me know what stocks you're going to be buying there in the comments. Let me know if you you like this new kind of informal video format where we just kind of talk about the news. And hey, YouTube thinks you're going to love this video on the right next. Click through it and let's see if they're