AI Stocks Are Getting Crushed, So I’m Buying The Shovels

AI Stocks Are Getting Crushed, So I’m Buying The Shovels

Summary

~1.0 min read
The current market downturn is a "hype crash," not an AI crash, creating opportunities to buy strong companies at a discount. AI infrastructure is still being built, with big tech spending billions, making "picks and shovels" companies essential. Focus on businesses like Nvidia, Taiwan Semiconductors, and Google, which provide foundational technology. These companies boast strong levered free cash flow margins and deep moats, enabling them to fund growth with cash, not dilution. This financial strength is crucial, as the real risk in AI investing is a company's ability to fund its build without relying on cheap money or perfect execution. Avoid speculative companies that burn cash and lack moats, as AI can quickly replicate or provide their value for free. Treat market volatility as a buying signal for well-funded, essential businesses. Invest for the long term (3-5 years), sizing positions carefully, and prioritize companies that can keep building even during market drawdowns.