5 Hot Stocks to Buy Now: May's Top Picks With Upside Ahead

The markets are moving like crazy heading into May, but the buying opportunities are still there. Market Beats Thomas Hughes joins us with his list of the top five stocks he's looking to buy in May. Thomas, uh, this list is a great one today. There will be a theme that becomes very evident as we make our way down this list today. But let's just talk about how much the market has moved specifically in some of those big tech names in just the last month. April has been tremendous growth story for a lot of different stocks. >> Right. Right there at the end of March in the beginning of April, uh the market hit a bottom. All the fears of SAS and AI disruption kind of went out the window in favor of the fundamental trends which is just that spending is is still happening. There's still like new demand for GPUs, but all that demand is now spilling over into all the nuts and bolts plays. So all the connections and all the supporting technologies that you need to build data centers is all part of the rally. The leading stocks really are tech, but it's a broad rally. It's not just tech. Other names are also advancing and also still small cap trades. I've seen some news saying that uh you know maybe the small cap trade is over. Maybe uh the great rotation's come to an end, but I don't think so. I think that this is just um another phase of that whole trade. uh the conditions that are going to be supporting the small cap stocks. The small cap stocks are still in in place and that's a trade that's going to play out, you know, for years. Right now, what we have though is just a lot of money flowing into data centers and GPUs and semiconductors and it's driving uh the entire market higher right now. Yeah, the entire market is really riding a wave higher and that leads to some questions for investors starting out the month of how do you handle where to put your money when you're looking in May if you're looking to add some stocks to your portfolio because there has been so much growth so fast and we're going to dive into that with all of the names that we are looking at today on this list. But Thomas, let's get into your list. We've got five names to cover. These are all your favorite stocks to look at for the month of May. What's the first stock on your list? >> Yeah, uh the first name is Starbucks. uh you know not a tech name, not an AI name, but really showing some nice bullish uh bullish technicals right now. Uh the earnings report was really good. In the article that I wrote about this, what I said is the nickel effect is taking hold. The nickel effect is CEO Brian Nickel and his impact on the business. If you look at Chipotle Mexican Grill, he took that name from a, you know, just a a humdrum hoham struggling uh fast food company to being a a global powerhouse, right? He's going to do the same thing with Starbucks. Uh Starbucks is already a global powerhouse, but it's got some problems with its operational quality and its efficiencies. And uh what Mr. Nickel has been doing is really leaning hard into improving consumer perception, uh flow through um internal efficiencies. All these things that are going to be unlocking and unleashing comp sales and and and and profitability. And what we saw in the last report was a surprising surge in comp sales and a surprising surge in profitability. And it was the profitability more than anything else that got the market moving. The company has said for the last few quarters that you know topline growth will come first but the bottom line recovery will come later because it cost them some money to get these things to happen. But what we're seeing now in the results is that uh you know accelerated profitability. Uh the impacts of these of these um these turnaround efforts are really gaining traction and we're looking for you know accelerating results in upcoming quarters. >> It's interesting you started off talking about the nichls effect. If we had talked about this exactly a month ago, the Nickels effect would have seemed to have been missing because Starbucks was on a a massive downtrend, right, just one month ago. So, let's talk about that volatility that we've seen. >> That's just concern. I mean, that coincided with a lot of the of the broad market selloff. So, this is just, you know, the the market being fearful and and selling off, but an irrational selloff, as you can see by the rebound. Uh, this qualifies as as a Vbottom. It's a near-term Vbottom. Late March hit a bottom, rebounded smartly. Now we're accelerating that rebound and the market just broke above a critical resistance point showing support now at that resistance point. Uh so to me what we've seen is is a significant market inflection and now what I expect is to see this market continue uh to move up from this level. So the next few weeks we might see some consolidation and some base building but in the mid to long term Starbucks stock is is a good is a good play. >> Well let's talk about what you saw in earnings a little bit too. So we talk about Starbucks. are seeing that there's an increase in some of their business, but the business is still coffee. They're they're selling coffee in all their different stores, but there are some different advancements happening with this company. I want you to cover that aspect a little bit more in Starbucks. >> Well, what they've done is is rationalize the menu to make it easier and more efficient. They've also added in more staffing to help with throughput. Uh throughput is is is the big the big hurdle for these kind of businesses. You got to get people in, you got to get them fed or or give them their drink and out the door as fast as possible. To do that, they're using technology. They're using algorithms just like they did with Chipotle that are help timing online orders and walk-in orders and drive-through orders so that the company so that the employees are able to focus on uh what needs to be made now and keep that customer flow flowing and that's unlocking comp sales and revenue growth and store level efficiencies which really plays into the profitability. These store level efficiencies already showing through. we can expect that future results are going to exceed uh what are already pretty robust analyst expectations. >> Yeah. So, it's not an AI story. It is a consumer story. However, AI is playing a role in some of that growth that Starbucks is seeing. And that leads us to the rest of this list. The next four stocks that we're going to cover all have an element of that AI story. Let's get to the second stock on your list that you are looking at to buy for May. >> Yes. So, my second stock is Amcore. AMCore is pretty critical to the GPU supply chain. They do advanced packaging and their primary client in that regard is Nvidia. So you got to think all the demand for Nvidia products is flowing through this business at least some of it because they don't do all the packaging but they do a pretty fair amount of it and uh that's driving their results. The last uh earnings report was better than expected came with really hot guidance and basically is pointing to higher share prices for the stock. Uh what we saw in the price action however um was a correction and that's really tied to the analyst sentiment. Analyst sentiment is very bullish and in the post-release activity, we saw some more upgrades and some more positive revisions. But the price action has significantly outpaced the analyst consensus. So this post-release correction really brought the market back down to consensus where we're seeing support being confirmed. So again, this is a market that's crossed above a critical inflection point is showing support at that level and setting up for its next move. Based on the the outlook for GPU demand and data center demand, that move will most probably be higher. Yeah, I want to talk about the moves with this one. I mean, it has pulled back, not quite 15% so far as we're as we're taping this today, just in the last few days, but it's still up over 65% in the last month. Is this a time that investors should be looking at getting into a stock like this when it's already had such a tremendous runup in such a short window? >> Well, I mean, it depends uh based on the outlook. Now, with this stock, the outlook is still growing. So, you know, the near-term correction is kind of a concern, but you know, the little bit the longerterm uptrend is what's in play. So, right now, what we're looking for is this market to continue consolidating as that outlook continues to swell. And if the outlook continues to grow the way that all the signs indicate that it will, this market will eventually move higher because the outlook for revenue and earnings will also continue to swell. >> Now, one last question on MCOR. Plenty of investors know this name. They've looked at it, but when it comes to making headlines, this isn't a name that's getting a ton of attention right now. Why do you think that is? >> Um, it's just a humrum name. They're not making cutting edge technologies. They're not really, you know, advancing AI. They're just a business services company. So, they could do advanced pack packaging, you know, for any semiconductor company. They just happen to be doing it for NVIDIA right now. And that's really where their strength lies. >> Yeah, it might be a humdrum name, Thomas, but it's critical in the AI infrastructure story. and so are many other boring companies that maybe not be making the headlines, but they play a key role in the AI buildout. You can check out a list of five other key AI infrastructure players where a lot of smart money is moving right now by scanning the QR code or clicking the link in the description to read that article for free right now on marketbeat.com. It just came out and these five names are already seeing a nice little boost from all of the smart money heading into them right now. Again, that article is free on marketbeat.com right now if you want to check that link after the video. Thomas, let's get on to the third name on your list. It's continuing the AI story, and this is an AI stock that you've talked about on your monthly buy list before, >> right? Um, that's Credo Technologies. Crito is pretty uh critical to AI because of active electric cables. Active electric cables are a copper data transmission cable that incorporates semiconductor technology into its construction. And so they're using semiconductors, microchips to help uh transmit and amplify power signals across these cables. That allows for longer cables with thinner wires up to about 15 meters I think which makes them really really ideal for the internal connections of data centers connecting the GPUs, connecting the CPUs, connecting all the other transmission uh products together because it's a cost-effective alternative to fiber optic and and that's what we're seeing in in their results. There's plenty of demand uh for this product. But more importantly, over the last couple of months, the company has had some um some patent disputes uh over its IP, its intellectual property. Those disputes are being settled favorably, which basically means that uh Credo is the owner of the technology. Uh a lot of the result of these these disputes are um licensing deals, which means that CTO is also opening up revenue streams and at the same time, it's just being cemented as the source of these products. is the OEM for them. So, you know, demand is just really big and that's all being seen in the revenue and the earnings forecast and also in the price action. >> Yeah, let's talk about that price action for this one. We just mentioned with AMKR that that one was up, you know, over 60% in a month. Credo is up over 90% in one month. The stock has had a huge runup from where it was. And again, you mentioned this as one of your on one of your monthly stock lists several months ago, and the stock had kind of been not doing much uh since that point. So, you were definitely early on letting investors know about this one. Why do you think we've seen such a tremendous leap for Credo um after it was spending a few months doing kind of a lot of nothing? >> It's the resolution of these patent disputes. That's what was depressing the stock price before. There was concern about whether or not the revenue outlook was going to be assured. If CTO didn't own the property, then uh anybody could sell it. Uh but now it looks like Credo is actually the owner of the IP and they're going to be the ones that uh either get licensing revenue by other manufacturers who are making the product or they're going to be selling it themselves. And so the stock price has rebounded pretty significantly because of that. Right now we're, you know, testing resistance near all-time highs. We've had a near-term correction from that level, but we're already rebounding again based on the outlook for data center growth and the demand for these cables. Revenue should continue to grow and that should help drive the stock price to new highs. Yeah, I think there's one more thing to point out with Credo. And even though it's had that nearly 100% gain in a month, it's had a tremendous jump, it is still trading under those analyst estimates. And I think that's an important thing to talk about. It seems like analysts really think this stock still has room to grow. >> Guys, I always say with the analysts, you know, you got to take that with a grain of salt because uh it depends on the trends. But um as with these other companies, the trends for credo are positive. We've got increasing coverage. We've got firming sentiment and rising price targets and they're all leading to the high end of the range which is up in the 260 region. So, we're looking at about a 30% upside um as it is right now. Assuming we get some more positive news in the upcoming reports, I would think that the analyst trends will remain bullish and continue to lift that up that upper end. >> Yeah, there's some strong outlook for Credo's future. It will be interesting to follow this one and see how much further it can go just in the next year ahead. Thomas, let's move on to the fourth stock on your list. This one I don't think has ever made your watch list before and it's a a newer name that we don't talk about that often on the channel. >> Yeah, right. This is um a small cap emerging tech company that's recently got onto my watch list. They're involved in um compound semiconductors, photonics, and advanced packaging solutions. So what they're doing is uh working to combine some different types of advanced packaging into a single process that allows them to um embed photonic devices uh specifically quantum dot lasers um onto traditional silicon. And this is important because quantum dot lasers are viewed as the solution for a lot of data center problems. What they do is you know produce lasers. They're tunable. They can be used for signing signals across um fiber optic cables and more importantly they do it at a a higher speed with more efficiency and a lot less heat and power consumption than traditional methods. So for data centers what it does is unleashes the data bottleneck while keeping the temperatures down really low which is really critical uh because right now data centers are are restricted by their heat. If we can't keep them cool they break down and the cooling process is a really expensive part of the construction. Uh so looking ahead, Aluma really stands to disrupt the data center industry. Some recent catalyst include new contracts from government sources. One of them came from NASA helping the company to commercialize its technology. So right now what Aluma is doing is transitioning from this development company to a commercial a commercial company. We're expecting them to begin commercial production or commercial scale production of their products uh by the year's end and start generating some real revenue uh not just defense contract revenue. And when that starts happening, we'll really see this stock price start to shoot higher. >> Yeah, this is absolutely the smallest company on this list today. And it's not one that's talked about a ton, but it has had a tremendous month, much like the other names on this list, and I feel like most stocks in this sector have done really, really well. This one up nearly 60% in the last month. How much further can this one go? And our analyst and and the coverage keeping up on the rapid growth that we're seeing for this stock? Generally speaking, I would say that the AI trade, like the initial AI trade, which is the GPUs and the buildout of data centers, is only about halfway over. So last fall when we got those fears about the AI bubble bursting and it being the peak was really just a stopping off point. Um I think that with some things that are about to happen over the next you know couple of months and with the industry kind of starting to catch up with some capacity with what it needs as far as um available space available components to build the data centers we'll start seeing that accelerate as well and that's just all going to you know play into the upside for all these stocks for Aluma specifically. Uh right now the technical action looks like we've got a pretty strong rally from 10 to about 20. The last couple of weeks it looks like we've been consolidating near those new highs, possibly a bull flag. And after that, it's just a matter of um how the data center trends play out. >> Yeah. On the data center story, again, that's really the theme of many of the stocks that we're talking about today. I think the one question retail investors have or the debate they might have is looking for those lesserk known stocks, those stocks that are these small cap stocks that still have room to grow. in the AI story. There's that thought process with investing versus some of the more popular names, the names that we hear about in the AI story all of the time. What's your take on what stocks to chase or which stocks to really put your money in if you're looking to to get a piece of the growth happening in AI right now? >> Look for the companies that have the demand and making the sales. So right now like with Aluma that's certainly a good play in AI but their story is probably going to be more of a longer term one because their products are going to be coming available um after a lot of the initial data data center buildout is done. So this will be part of the retrofit story the upgrade cycle story. So in upcoming years when data centers start to burn out and as we start to advance the technology they'll be refitting data centers with GPUs and CPUs that use aluma photonix and will you know unleash that that next wave. Uh, so until then, again, just stick to the companies that are that are making sales today and have demand today because those are the ones that are going to continue to win. >> Well, that is a perfect segue into the last stock on your list. And this is one that I I made you save for the end. I think it would have topped your list if possible because it's a name that has appeared on Thomas' watch list several times over the last year and a half, almost two years. Probably the most frequent name that you've seen on Thomas' monthly watch list. And it is one of my top performers on Bird Spies watch lists. It's up almost 70% since I put it on my watch list in late November. If you want to follow along with the stocks that we talk about on this channel, make sure to scan the QR code or just go to marketbeat.com/bid to take a look at this watch list and see just how much some of the stocks that Thomas talks about every month on his buy list move over time. And this is a stock that you are still bullish on today, Thomas. Let's get into it. >> All right. Uh there's lots of great stories in semiconductors and AI today, but I think that advanced micro devices might be the very best one. Nvidia has the first mover advantage. It certainly is kind of untouchable in in that regard, but AMD is about to launch the MI450 line, which will put it on par with Nvidia and really unleash some wicked hot demand. However, the catalyst that's driving the stock today is Intel. Intel's results revealed hot demand for CPUs, which is kind of um like a a next phase of AI. The CPU uh demand is tied partially to GPU and um data center buildout, but also very much to inference. Inference is the application of AI. And as far as Intel's results go, it points to strength for AMD as well in in in that segment. And so that's a double tailwind for the company. Not only are we looking for GPU strength, but now we're looking for CPU strength. And that's not even counting the longer term story which is the embedding of AI into PCs and devices which AMD also does. So the stock price I mean it's almost as vertical as it can be. So the last four or five days involve a peak a red candle a pullback but the last three days have shown another three white soldier pattern recovering all of those losses putting the market on track for another new high which just tells me that this market is under wicked hot accumulation with the upcoming catalyst. I see AMD stock price. I mean, it could easily double if you look at on a valuation basis. Um, Nvidia trades about uh six times as high of a valuation as AMD. So, we're looking at a a 500% gain possible over the next, you know, couple of quarters to two years. You know, assuming that the market really wants AMD GPUs, which I think is going to be the case. >> Yeah, I want to talk about when that case will be proven. We've been talking about AMD uh really helping to fill a part of the market that Nvidia might not be able to keep up with the demand. There's so much demand for these GPUs that AMD can come in and really fill that space because there's enough demand to go around for the both of them. But have we seen that yet? Let's look at AMD's recent report. Have we seen that actually showing up in their books? >> Right. So, we are seeing AI demand, but the real catalyst for AMD is going to be when it launches the MI450. Up until now, AMD has been more of a niche player. Didn't have rack scale solutions, which are what the hyperscalers need. The ability to put out large amounts of GPUs all at once very easily. But that's what the MI450 does, and that's what's going to unleash this demand. As far as the potential for revenue growth, what you've been saying is right. Um, the indications are that demand for GPU so far exceeds Nvidia's ability to provide it that AMD can sell as many GPUs as Nvidia does and still not state the demand. That's really a phenomenal a phenomenal outlook. Um, as far as the timing goes, we've been expecting this for quite a long time. AMD's been working on this for a couple of years now, but it takes that long for these things to unfold. Uh, so that plays into market volatility. we see this thing happening, the price action shoots up. Then the market realizes, oh, it's going to be six months or 12 months or 18 months before that happens. What are the results today? That causes some selloff. But if you look over the last year or so, this market has just been consolidating sideways or like I guess the last few months, last six months, consolidating sideways at highs, set another new high in the past month, and it's definitely moving higher. >> And that is why this name continues to make your watch list month after month. You are very bullish on this name. and again have been for a long time. If you want to look back and see what Thomas had to say about AMD last month and the other stocks that made his watch list at the start of April, make sure to watch last month's five stock picks for Thomas, too. You can watch that video