3 AI Stocks Insiders Are Selling. Most Aren't Ready for What Happens Next.

They're some of the highest performing stocks in  the market and yet insiders are selling. What does   this mean for investors? Joining us today is  Marketbeat analyst Thomas Hughes with a list   of three high-performing AI stocks that all have  some pretty big insider selling happening right   now. Thomas, I'm excited to dive into these  names. There's one I'm really excited to give   an update on. It's been over a year since we've  talked about it on the show, but let's first talk   about insider selling. Why is this something that  you pay attention to? Well, it's just a market   dynamic. It's one of the things that influences  stock price directions. It's not really an awesome   signal by itself, but it can kind of give you a  hint or a clue for some stocks to look at. So,   it's always a a good screen to look at to see  what's happening, see what pops up. And, uh,   this time we had a couple of good names. Yeah, a  couple really good names. We're going to get into   those in a second. I think it's also good to start  off with. Insider selling can be scary sometimes.   Why would a why would a CEO why would a high exec  be dumping massive shares of a stock especially   one that's performing really really well? Let's  talk about some of those reasons though. Some   of them are not scary. Some of them are just  very practical. Well, right. Like, you know,   shortselling is one of those things that was  scary a long time ago when there was not a   lot of regulation and a lot of like market  manipulation and insiders might sell a stock.   If they had inside information, they'd get out  and make a lot of money or get out before they   lost money and investors would be left out in  the cold. But today, there's lots of laws and   regulations. There still can be some shadiness to  it, but generally speaking, these people have to   telegraph what they're doing to the market. They  certainly can't just sell at the drop of a hat.   So a lot of the times the insider selling, insider  buying is being done based on pre-arranged trading   plans. Uh so the signals that it sends um often  times can be dubious. All right, let's talk about   what sector all of these names are in. And that  is that AI story. Again, some of these names that   we're going to get into. These are huge stocks,  some of the best performers on the entire market.   Let's talk about that that part of the story and  why uh insider selling combined with a really   booming time for a lot of these AI companies makes  this particularly interesting. Well, right. So,   all these stocks are up high triple digit  amounts over the last year, two, three years,   providing ample incentives. Insiders that benefit  from sharebased compensation have opportunity to   lock in profits, but also their own portfolios can  get out of whack. They need to sell to rebalance.   And then alongside that, they're starting to take  profits. there going to be tax implications as   well. So, they got to pay taxes. So, in in this  regard, uh the spike in insider selling is really   driven by the ramp in share prices and it's the  ramp in share prices and what drives it. That's   the real story here. Yeah, certainly still a lot  of growth for these names that we are going to get   into today. And I know you and I just had a video  on Thomas talking about the AI growth story and   whether it's overblown or if there's still a big  runway ahead. There's all kinds of financials we   detailed in that last interview. We're going to  get into some of them today, too. And just like   these companies and this AI buildout has a really  complicated financial story, so do some of our   own personal finance stories. A big thank you to  Monarch for sponsoring today's video. 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So,   setup is fast no matter where you bank or invest.  If you want to try it for yourself, scan the QR   code on the screen right now for a special offer  just for our market beat viewers today. All right,   Thomas, let's get into this list today. What is  this first big AI company that you're looking   at that has some pretty big insider selling  happening? Yeah, and that's Seagate Technologies.   Seagate Technologies is important for computer  memory, for data center memory. But what I want   to point out is that this has nothing to do with  HBM memory. HBM is getting all the headlines right   now because it's critical for the GPUs and for  the computing power of the GPUs. Uh but the other   story is uh the magnetic and the flash drives that  are being made by Seagate. And that's where the   data is being stored when it's not being used by  the AI. The DRAM and the NAND is all short-lived   memory. is constantly being refreshed, but what  do you do with it when you're not using it? That's   where Seagate comes into play. So, all these data  centers are being built with all these GPUs and   all of this HBM. They also have to have a lot of  of Seagate products as well, and that's being seen   in in the results, and that's what's driving  the share prices higher right now. And boy,   have they driven higher, up over 640% in the  last year. This stock has been one of the best   performing stocks in the market. This whole memory  sector has been a very high performing sector.   But let's talk a little bit about what that could  mean looking at this share price and and seeing   some insider selling happening at the same time.  So the insiders are selling into the rally because   of that humongous share price spike that you've  seen. A 600% increase is going to throw anybody's   portfolio out of whack. Even not considering  that that aspect. That's just a lot of profits   for people to have um in their possession. It's  kind of ridiculous, kind of foolish not to take   some profits off the table in that regard.  I might actually be more suspicious if they   weren't selling in this regard, but you know, it's  just it's just the natural mechanic of the market.   They're being paid with shares. The share prices  go up. So, it's just it's a natural response to   want to take those profits off the table. Let's  look at some of the details of who is doing that   insider selling or how much insider selling we're  seeing for Seagate. Well, it's broad-based. It's   throughout the seauite. So, it's it's not any one  executive. It's all of them together. They're all   participating in the sharebased compensation.  They've all got a sentence to sell. And as far   as the volume goes with Seagate and these other  companies, it has it has been ramping. They're   selling into into the rally. So, as share prices  get higher and they've got more incentive to sell,   they're they're doing more selling. Let's talk  about any potential uh signals for investors who   maybe own Seagate themselves already. Is this  a sign that maybe you should also be taking   some profits right now? Uh how do you view what  the insiders are doing and how retail investors   uh what they can gain from that? Well, I mean,  it certainly is a signal that you could be taking   profits. uh there is profits to be taken. As  far as the signal goes for right now, I believe   uh the insiders might present a headwind. We  might get some corrective actions before the   next earnings release. But based on institutional  activity and the analysts, I would call that a   buying opportunity. I would expect to see the  upcoming release to confirm what's been happening,   which is just accelerating and ramping business  based on this accelerating and ramping demand. And   within this story, Seagate along with these other  companies has been established as uh the operator   that can deliver solutions at scale. And when we  talk about scale these days, that's hypers scale.   We're talking about for one data center, that's  tens of thousands of GPUs. That's a lot of memory   with HPM, but that's a lot of memory storage for  Seagate. And we're talking about hundreds of data   centers around the world being built right now. So  there's just a really a lot of demand for product,   right? And so that that to me that demand says  that the the growth story is still going for   Seagate. But when you look at insider selling  normally sometimes it might make you think,   okay, well is the growth story over? Are they  selling now because they don't anticipate the   stock continuing to see the kinds of gains it's  seen over the last year or so? How do you balance   those two kind of conflicting data points? Well,  you just have to look at the fundamental story,   you know, and again, they're selling. Sure, that's  a signal, but the fundamental story is business   is growing. We're ramping and accelerating.  uh the outlook is still um unknown because   it's still it's still growing. The demand is  still increasing. So in that in that regard,   this stock price is still in an uptrend and that's  reflected in the analyst and the institutional   activity. Now Seagate is a different kind of  memory stock than MU. Correct. More of what   you explained when you first started talking about  this company. Absolutely. Yeah. MU is the headline   story that's tied to the actual GPUs. Seagate is  more of a backend nuts andbolt story where you're   building this data center that's going to be using  all these GPUs and using all this HBM. The memory,   the data has to come from someplace and it's  being stored on Seagate Technologies products.   All right, that makes sense. So clearly still  a ton of demand for that storage capacity going   into the future. Let's talk about whether Seagate  is still a a stock to buy for retail investors   who've maybe missed this runup. they they aren't  in the position of holding the stock right now,   so they can't sell and take those kinds of  massive profits. But is it a time to look at   potentially adding this stock to your portfolio if  you don't have it yet? Yeah, I think all of these   AI critical names are still very much in their  uptrends. As I was saying, we might see some price   weaknesses. Those will be buying opportunities. I  think looking forward we won't see the explosive   gains where we get 200% in a single year but the  valuations and the earnings outlook suggest that   over time we'll be ratcheting higher into a very  robust forward outlook. All right, so that's a   first company where we are seeing some insider  selling in this AI story. Let's get on to this   next name and this is the one I'm excited about  because it's been almost a year since this name   has popped up on the show. Right, that's Texas  Instruments. Texas Instruments is really a humrum   name. They don't make anything exciting. It's  analog microchips. They're doing power control and   sensing and connectivity kinds of things. Uh for  a long time they were struggling because there was   massive global over supply. That was really the  story with chips until just like 18 months ago,   right? Over supply and just sluggishness. And  then inventory started to normalize. Business   started to gain traction and then the data  center buildout. Data center buildout requires,   as we were saying, tens of thousands of GPUs per  data center times hundreds of data centers. But   the GPUs have to be connected. There have to be  sensing devices to make sure they don't get too   hot or too cold or too much power or too little  power. And Texas Instruments is the producer that   can deliver those products at scale. Again, it's  the scale that matters. When Nvidia is selling   $70 billion worth of chips in a quarter and those  are going into hundreds of billions of dollars of   Oracle data centers and other data centers, they  need billions and billions and billions of dollars   worth of sensors and connectors and power supply  modules. That's where Texas Instruments comes into   play and you can see that again in their results.  Yeah, the results are pretty stunning and I'm sure   it's not just the calculators that they make that  are boosting up those earnings. It's really that   AI story. It is fun to see a company that's very  nostalgic and many of us probably grew up with   hands-on in math class, right? And did you have a  Texas Instruments uh calculator? PI was the only   calculator back in the old days. I mean, that was  that was it. And there were some other spin-off,   you know, knockoff spin-offs, whatever, but they  they were the only ones. And just bringing that   up is good, too, because uh for the long term,  right now it's data centers that are driving the   business. Over the long term, it will be  the application and implementation of AI,   which really is physical AI in the IoT, which  means embedded processors, which is what Texas   Instrument does, as well as all those other,  you know, power modules and sensors that will   be required by the IoT devices. So, to me, Texas  Instruments has a very robust long-term play on   the nuts and bolts of AI going forward. Let's  get over to that insider selling happening in   Texas Instruments. What have we seen for insider  selling with this company? Oh, it's the same as   with Seagate. It's broad-based. sits throughout  the seauite and it's been ramping as share prices   have gone higher. Really not surprising given this  situation they too get sharebased compensation and   have ample incentive to want to take profits off  the table. Yeah, if you're in the seauite of Texas   Instruments and you've been there for a long time  and you're getting the sharebased compensation,   taking a little bit of those 80% gains the  company has seen year to date, not a bad idea,   especially if you've been with the company since  uh the late60s when it went public. This company's   been public for a very long time. So again,  I think about those historic legacy shares of   this company that were around, you know, 50, 60  years ago that are now performing at this level.   Do you think some of that exists in the market  right now? Of course. I mean, this is a legacy   company. Plenty of time for for old money to have  set and compounded this position um over time. I'm   sure there there are very many long-term holders  that are sitting pretty right now looking at their   original their original cost basis. Let me know  in the comments if you are one of those early   holders. How long have you been holding Texas  Instruments and have you sold any to take some   profits yourself uh over this runup this company  has seen the last year or two? I'd love to hear   from any early holders. Let's see the early Texas  Instruments stockholder that we can find in the   comments on this video. Okay, Thomas, let's talk a  little bit more about right now. If you don't own   Texas Instruments, do you want to get into this  stock right now? Well, I don't want to wait for   some price weakness given the high share prices  right now, but earning strands again, robust,   profitability, robust, analysts are leading the  market, institutions are buying. So, to me, it's   it's a win-win. You're just going to want to pick  an opportune time to get in. Yeah, this story with   Texas Instruments is somewhat what we're seeing  in the Power Grid story as well. These companies   that have been around forever, but are now seeing  demand skyrocket because what they are offering   is in such demand from the data center buildout.  So, if you want to take a look at this brand new   article just came out this week. It's five stocks  that are solving the AI power crisis. And again,   there's a couple of legacy companies in here that  have been around since the 60s or 70s, much like   Texas Instruments, and are now seeing a resurgence  in their stock price because of all of that demand   and the unique problem that they solved. So,  scan the QR code, uh, click the link in the   description to get that article for free right now  on marketbeat.com. It's another really interesting   read on some companies benefiting much like this  one from the AI buildout. Well, Thomas, let's get   to the last stock on your list today where we're  seeing some insider selling. This one's unique   because unlike the last two stocks that have had  tremendously strong charts, this one's had some   volatility. Yeah, we're talking about Cloudflare  and it has seen some volatility over the last   couple of quarters. That's due to the the software  apocalypse implosion. But if you look back over   the last couple years, this stock is up about  400% from the lows in 2022, presenting quite an   opportunity. What you got to think about with um  with AI and with cyber security. AI cannot exist   without cyber security. You can build the AI,  you can build the data centers, but if it's not   secure, you can't trust any of it. The data could  be compromised, the models could be compromised.   So in that situation, at best, they're unusable  and at worst case scenario, they're dangerous.   Cloudflare in in that realm, the world of AI cyber  security is a frontline operator serving as a   reverse proxy. Internet traffic is being routed  through its servers versus um the home servers   so that you get that front line, that front edge  of security kind of keeping the bad players out   as best as possible before they can get to your  systems. And uh the company it's it's it's global.   It's got uh data centers in like 200 cities  globally. So, it provides really broad coverage   and deep service coverage for for its clients  globally. Let's talk about when that insider   selling was happening. Was it on one of the highs  or the lows that we've seen in the last few months   of volatility? And who's doing that selling for  this company? Well, again, it's broad-based and   it has been ramping over the last few years as  share prices have gone higher. You can see in   the data that activity tends to ramp as prices go  up and it kind of slacked off a little bit earlier   this year. Right now, it's been a little bit high  in Q2. Uh but again this is insiders selling into   a rally taking profits in a very robust uptrend  with a very robust outlook still ahead. One thing   for the naysayers here uh on the software story  there's certainly uh plenty of investors who are   not into investing in software companies right  now because they believe the thesis that AI is   going to take over what they have to offer even  for some of these cyber security companies. I've   heard some people make that argument. So, if you  feel that way and you see insiders uh ramping up   their selling of this stock, does that potentially  try to prove your point of of thinking that the   insiders are selling because maybe they believe  that they're not going to see the recovery in this   company? What do you say to that thesis and that  side of that argument? I think that if insiders   thought that AI was going to kill their business,  they wouldn't sell their stock. They would quit   their job and go somewhere else. I think right  now they're just selling into the rally to take   profits. The story that I'm seeing in all the  earnings results is that AI is improving their   business. Uh they're they're being driven by new  clients and by penetration, high demand. Um and   Cloudflare specifically by Agentic AI because  Agentic AI is really driving an exponential   increase in internet search queries. So there's  just lots of business for this company. As far as   um AI taking it over, um as I've been saying, I  think it's far more likely for these established   software companies with an entrenched business to  utilize AI than it is for AI to come in and take   over their business and have to build that new  ecosystem. Yeah, you made some really good points   there to that argument. Thanks for addressing  that. Let's talk a little bit more about their   earnings uh because I think that that's something  to look at too in this discussion about where are   these software companies heading. If you look  at their earnings and what's happened not only   this quarter but the last couple of quarters,  what story do you see there, Thomas? Well,   one of the concerns with the software companies  and with Cloudflare is is slowing growth. But   even before the AI boom, slowing growth was being  offset by better than expected performance. So, it   was slowing. That's the law of large numbers. The  bigger you get, the less of a percentage gain the   same dollar amount is. So, they were slowing but  still growing very robustly. Um, outperforming,   which to me is a is a strong signal. But then AI  comes along and now they're they're reacelerating.   Uh they're also outperforming and just providing  plenty of catalyst for market sentiment. All   right. So you clearly still see a future for  Cloudflare. Is this stock still a buy for retail   investors today? I think it is. Uh right now  it appears to be consolidating within a range.   The analysts are leading it higher. Uh we're just  waiting for the next catalyst which will probably   come out in an upcoming earnings release. assuming  that it's another good one, I would expect to see   analysts continue to strengthen their their their  forecast and to help drive the market to a new   high. Um, most recently, we've broken out of a  big trading range. So, to me, that's setting up   a pretty substantial upside. So, over the next  couple of years, we could see this stock uh,   you know, rise by another $200 probably. And just  look at the earnings. That's what you said today.   That is what you said when in our conversation  earlier last week talking about where some of   these massive AI companies could be heading  in the future. Look at the earnings. Look at   the real numbers. That's the conversation you  can watch from Thomas and I. Uh a video that   came out on Wednesday in the middle of some of  the hyperscaler downfall h that was happening   earlier this week. Make sure to watch that full  interview here. There's some really good insights.