4 Quality Stocks To Buy Outside The AI Bubble

When the dot-com bubble burst, the Nasdaq lost  78%. Most of the companies that jumped on the   dot com trend were shut down. And if your money  was in tech, it would take about 15 years to get   back to where you started. But here is the  part most people missed. During that crash,   the boring non-tech stocks went up instead,  such as energy, consumer staples and utilities. That same thing is happening today. While  everyone is jumping into AI companies right now,   there are many non AI companies that are  doing just as well. And more importantly,   their earnings don't depend on the AI story  working out. So even if the AI bubble bursts,   they would come out relatively  unscathed. In this video,   I want to show you 4 of those companies today.  Let's not waste any time and let's jump right in. The first company is Costco. This  is a warehouse club you have to pay   an annual fee just to be allowed to  shop at. And the reason people shop   at them is because they are famous for  selling items at rock-bottom prices. How rock-bottom? If you just take their net  sales and minus off their merchandise cost,   there would barely be any profit left.  In fact, their gross margin percentage   last year was only 11.12%. Meanwhile, Walmart  sits closer to 24.2%, while Target is 27.9%. So how does a shop that barely marks  anything up make any money at all? The   answer lies in their membership fee. At  just USD 65 a year, members get to shop   at any Costco in the world. Or if they  upgrade to the Executive tier at USD 130,   they'll not only get in before the doors open to  everyone else, but also earn back 2% on what they   spend. And if you shop there often enough, that  2% would easily cover the membership fee itself. Now, because that membership fee  costs almost nothing to collect,   nearly all of it goes straight over to profit.  This means that a big part of what Costco earns   has nothing to do with how much you spend  inside the store. It only needs you to   renew the membership. And unsurprisingly,  because of how good of a deal this is,   close to 90% of members in the US and  Canada renew their memberships every year. As a result, over the last 10 years, Costco's  revenue has been increasing steadily,   going from USD 118B back in 2016,  to over USD 275B in 2025. Likewise,   their net income has been increasing  steadily too. Same for their free cash flow. This is despite them raising the membership  fee only twice in that whole period,   from USD 55 to USD 65. So that growth  didn't come from them squeezing more   money out of their members. Instead, it  is simply due to more people signing up. This gives Costco a level of stability that most  other retailers simply don't have. For example,   back in 2009, the whole world was in a recession.  People were cutting back on their spending. As a   result, Costco's net sales did drop by 1.5%,  while their net income fell by 15%. However,   during that period, their membership fee income  still went up, as their cardholders continued   to grow that year. So while the shopping  slowed down, the renewing didn't stop. So what is the catch? It is the price.  Because Costco's earnings are so steady,   the stock often trades at a very high valuation. Costco's forward P/E is about 46,  which puts it at 4.4% above its   own 5-year average. This means that  the stock has been priced like this   for 5 years, as the business kept  delivering through all of them. However, despite that, this hasn't  stopped Wall Street from being bullish.   Wall Street analysts are giving Costco  an average price target of USD 1,077,   which is about 12.0% above  where it currently trades. In short, because of how reliable that membership  money is, Costco is able to keep delivering even   when times are bad. But this is certainly not a  cheap stock, and it hasn't been one for years. One of the tools I use to research  companies is Seeking Alpha. It's a   crowd-sourced research platform where you'll  find analysis from thousands of contributors,   earnings call transcripts, and a full  breakdown of a company's financials.   Every stock gets scored on valuation,  growth, profitability and momentum,   and next to that quant rating you get  their own analysts' view and Wall Street's. They also have a model portfolio called Alpha  Picks, where that same quant system screens   the entire market and their analysts  then hand-pick 2 new stocks from the   shortlist every month. Since 2022, it's  beaten the S&P 500 by more than 3 times. One example for me was Alphabet. I bought it at  around USD 160 after seeing it on Alpha Picks,   and it's now around USD 340, so I'm up  more than 100% on that trade. That's   what I like about Alpha Picks. It gives me  specific names I can go and research myself,   rather than another list of scores. So whether you already pick your own stocks and  just want every number and grade in one place,   or you want a second opinion before you buy,   I think Seeking Alpha is useful for investors  at all levels. If you want to check it out,   you can use my link below to get a $50 off Alpha  Picks. Anyway, let's get back to the video. Next up, we have Constellation Software.  This is a company that's often called the   Berkshire Hathaway of software.  So what it does is buy small,   boring software companies and add them to  its ever-growing portfolio of companies. And when I say boring companies, I mean  companies that make the software that   town councils use to issue permits and  run their schools, the system that your   utility uses to work out your electricity  and water bill, the booking system for gyms,   golf clubs and theme parks, or the scheduling  and patient records inside hospitals and clinics. Now, while many of these software systems  are boring, many of them are essential,   because you simply cannot run a hospital, a  town council or a utility company without them. But then, why did this stock fall 57% from  its peak? The short answer is AI. The fear is   that with AI coding tools, these customers  can now build their own systems in-house,   and stop paying a vendor to maintain them  every year. Or a new startup could use AI to   build the same software for much cheaper,  and start taking those customers away. However, in reality, this is much easier said  than done. You simply can't just swap many of   these systems out, because pulling them  out would mean retraining all your staff   and moving years of data somewhere new,  which could be costly, or even risky. And that is exactly what an analyst pointed  out. Because the switching costs are so high,   and because the software is so deeply  tied into how these places run,   AI is far less of a threat  here than the market assumes. On the contrary, Constellation's own management   believes that AI could help their teams  build faster, rather than replacing them. Looking at the financials, Constellation  has seen some pretty amazing growth over   the past 10 years. Revenue grew from  CAD 2.85B in 2016 to CAD 15.95B in 2025,   net income grew about 2.5 times, while free  cash flow grew during that period as well. Though, the catch is that most of  that growth came from acquisitions,   and not from the businesses they already  own. If we were to look at Constellation's   organic vs inorganic growth since 2010, we  can see that their organic growth has only   averaged at around 1.5% per year.  And as Constellation gets bigger,   they have to keep buying more and more  every year just to keep that growth going. Seeking Alpha's analysts rate it Buy, with  no sells. Likewise, Wall Street analysts   are also rating it a Buy, with an average  price target of 25% above current levels. In short, Constellation owns the kind of  software its customers can't walk away from,   and after the fall this year, it is starting  to look quite attractive. However, with organic   growth at just 1.5% a year, the deals would have  to keep getting bigger just to move the needle. Next up on the list is Mastercard. This is  a company that owns the network that moves   the money between your bank and the shop's bank,   and its whole business is taking a small  cut of every swipe that passes through. And because the fee is a percentage of each  transaction, Mastercard's revenue would naturally   rise as prices rise, and as more and more people  switch from paying via cash to cards and phones. This makes Mastercard almost immune  to bad times. Because even when the   economy slows down, people still have  to pay their bills, buy their groceries,   fill up their tanks and see a doctor.  And because many of those payments   still run through the same rails,  Mastercard still gets to take its cut. Looking at the financials, Mastercard's  revenue has tripled over the past 10 years,   going from USD 10.8B in 2016 to USD 32.8B   in 2025. Net income grew even faster,  while their free cash flow grew as well. So then, what are the risks for Mastercard?  Personally, I think there are 2. The first one is a bill sitting in Congress called  the Credit Card Competition Act. If it passes,   the big banks would have to put  a second network on every card,   and the shop gets to choose which one your payment  travels on. And if they choose the cheaper rails,   Mastercard could get skipped entirely. But  as one analyst noted, this is a US bill,   and over 71% of the money that ran through  Mastercard in the first quarter of 2026 came from   outside the US. So even if it passes, it would  only touch a small part of Mastercard's business. The second risk is stablecoin. So the idea  is that with stablecoins, money can move   straight from one party to another and settle  almost instantly, without ever touching a card   network. This means Mastercard could get cut out  of the whole thing. That was the argument anyway. But instead of fighting it, Mastercard just  bought a company called BVNK, which builds   the plumbing that lets businesses actually pay  each other using stablecoins. And this is not   some random startup. BVNK already moves around  USD 30B a year across more than 200 markets,   for companies like Worldpay and Deel. So while  everyone is worried about stablecoins cutting   Mastercard out, Mastercard has quietly gone and  bought the rails that would have replaced them. Looking at the valuations, even  though the stock has already climbed   back to within a few percent of its high,  Mastercard's forward P/E is still about 28,   which is around 15% below its own 5-year average. Seeking Alpha's quant model  only gives it a Hold. However,   their own analysts say Buy, while Wall Street  is even more bullish with a Strong Buy,   and a price target that's about 17%  above where it currently trades. Last but not least, we have Intercontinental  Exchange. This is the company that literally   owns the New York Stock Exchange. So every  time somebody buys or sells a share on it,   or trades an oil or interest rate contract  on one of their futures exchanges,   ICE gets paid a small fee. On top of that,  they sell the market data that comes out of   all this trading, and they own a big chunk of  the software that runs the US mortgage market. So when times are good and everyone is piling  into the market, ICE would get to earn its fee   on every one of those trades. And when the bubble  pops and everyone rushes for the door at once,   trading volume spikes, and ICE would  make even more on the way down. Looking at the financials, ICE's revenue  has almost doubled over the past 10 years,   same for their net income which has also  grown steadily from USD 1.4B to USD 3.3B,   and free cash flow have been increasing too,  though it has been a little inconsistent. Currently, the stock is still down by about 18%  from its high. And there are 3 reasons for that. First, there are concerns over their mortgage  segment. Unlike their other business segments,   which get paid on trading activity whether the  market goes up or down, the mortgage segment   depends heavily on the interest rate environment  and how many people are actually buying homes and   refinancing. In the first half of this year, that  segment only made USD 32M in operating profits,   after losing money over the same period last year.  And going forward, analysts believe that this   segment is going to continue to face headwinds  from high mortgage rates and lower total sales. Second, a big part of exchange revenue  today comes from retail traders,   the ones buying short-dated options and  taking fast, high risk bets. But this year,   regulators started allowing crypto platforms like  Coinbase and Kraken to offer perpetual futures,   which are basically leveraged crypto bets  that never expire. And the worry is that   with these new contracts around, that same  crowd of traders now has somewhere else to go,   which may eat into the trading fees that  ICE has been collecting all this while. But that fear may be overblown, because so far  it hasn't shown up in the numbers. Last quarter,   transaction revenue at the New York Stock  Exchange was actually up 15% from a year ago,   and their total futures and  options open interest was up 20%.   So if that crowd is leaving, it isn't showing yet. And last but not least, there's the whole AI  fear. About half of what the company makes   is subscription money, where banks and  fund managers pay them every month for   their market data. And the fear this  year is that if an AI can go and pull   all of that together on its own, those  subscriptions may stop getting renewed. But so far, the numbers are saying the opposite.  The division that sells all this data grew 8% last   quarter, on the back of new customers. The  money tracking their indexes is up 29% from   a year ago. And within that same division,  the part selling data connections grew 11%,   precisely because of demand coming  from AI workflows. So if anything,   ICE is already benefiting from AI, since all  those AI tools still need somewhere to pull   their numbers from, and ICE owns the exchanges  where those numbers get made in the first place. Looking at the valuations, Intercontinental  Exchange is currently trading at a forward   P/E of about 21, which puts it  22% below its own 5-year average. Even after selling off, Seeking Alpha's  own quant model still rates it a Hold,   with their own analysts saying the same.  However, Wall Street is a lot more bullish,   rating it a Strong Buy instead, while giving  it an average price target of USD 185,   which is about 19% above  where it currently trades. In short, ICE earns a fee on every trade, so if  the market does crash, that actually means more   business for them. However, the biggest headwind  for them right now is the mortgage side of the   business which is barely making anything,  and that won't pick up until rates come down. So those were the 4 stocks whose earnings don't  depend on the AI story working out. Anyway, that's   all for this video. All the links, including  the USD 50 off, are down in the description   below. Hope you found this useful. Like and  subscribe, and I'll see you in the next one.