The stock market is selling off a bit this Friday morning, but don’t let that distract you from the long-term opportunities that are forming. The post-election buzz is wearing off, and I wouldn’t be surprised if we saw a minor correction in the coming days and weeks. However, investors need not fear this period of volatility because it’s likely that the bull run is just getting started.
Over the past week, I conducted a deep dive into historical periods with similar macroeconomic setups to today. I discovered something very interesting. Although I compared many different periods, the one that was most like today’s environment was the 1995/96 period.
Back then, the economy was quite similar – stocks were at all-time high, the economy was growing nicely, employment was robust, the Federal Reserve was cutting interest rates after having raised them rapidly and even inflation was at almost the exact same level. And although there were certainly differences, there was one final similarity: the technology boom.
Today, that boom is in the Artificial Intelligence industry and although it is practically the only thing Wall Street has talked about for the last two years, it may still be in the early stages. What’s especially interesting is that in the late 90s, there was an initial boom led by infrastructure players like Nvidia (NVDA) and Microsoft (MSFT), which was then followed by a second wave
I think that a second wave is happening today in the AI market.
What are the Next AI Stocks?
I will be frank with you; it is difficult to pick out who will be the next wave of winners in the AI space. If we look back to the early 2000s tech boom, the first wave of winners were Microsoft, Intel and Cisco among others who were building the infrastructure. These stocks remained leaders throughout the bull market, but notably led the early days by laying the groundwork.
Today’s version of the first wave winners, who are also likely to continue to lead are Nvidia, Taiwan Semiconductor (TSM) and Vertiv (VRT) among several others. Not only do these stocks still have reasonable valuations and strong projected growth, but they also boast Zacks Rank #1 (Strong Buy) ratings today, making them immediately attractive investments.
So where are the second wave winners? It will be important for us to keep our ears to the ground and remain tactical in searching for these stocks. Second wave winners in the 90s included Amazon, eBay, Yahoo, Qualcomm, Juniper Networks and many others. These were companies that were innovating on the new internet stack with software, platforms and further infrastructure offerings.
The first two names that jump out to me when looking for the second wave stocks are Palantir Technologies (PLTR) and C3.ai (AI). These two have been on many investors' radars but remain compelling opportunities, as both have Zacks Rank #2 (Strong Buy) ratings.
Another pair of lesser-known stocks that caught my eye are Innodata (INOD) and BigBear.ai (BBAI), which boast Zacks Rank #1 (Strong Buy) and Zacks Rank #2 (Buy) ratings, respectively.
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Innodata and BigBear.ai are Offering Innovative AI Solutions
Innodata specializes in providing data engineering services with a focus on artificial intelligence (AI) and content management. The company supports major technology clients by enabling large-scale data annotation and AI model fine-tuning, particularly for large language models. Despite its modest size, it has managed to secure contracts with leading hyperscalers and technology firms. Innodata's focus on AI positions it well to benefit from the growing demand for advanced data solutions.
Innodata’s most recent quarterly earnings report was extremely encouraging. Innodata achieved record quarterly revenue of $52.2 million, marking a 136% year-over-year increase. This robust growth was driven by expanded engagements with high-profile tech clients and strong demand for generative AI-related services. The company's customer base now includes five of the Magnificent Seven tech companies and a major AI research company.
BigBear.ai operates at the intersection of artificial intelligence and decision support, offering data-driven solutions for the defense, government, and commercial sectors. The company provides predictive analytics, AI-powered simulations, and data visualization tools to support mission-critical operations. BigBear.ai is positioning itself as a leading player in the AI-driven enterprise and government services space, echoing the trajectory of companies like Palantir.
At its recent quarterly report, BigBear.ai secured a five-year production contract valued at $165.15 million to deliver the U.S. Army's Global Force Information Management – Objective Environment (GFIM-OE). This marks a continuation of its partnership with the Army, transitioning 15 legacy systems into a unified intelligent automation platform, aligning with the Army’s data-centric management vision.
It also secured a $2.4 billion shared contract with the FAA to provide cutting-edge IT and emerging technology solutions to the Federal Aviation Administration, expanding its reach into aviation tech. With these significant wins and a clear focus on large-scale, transformative AI projects for government and enterprise clients, BigBear.ai demonstrates its potential to follow the high-growth path of peers like Palantir.
Should Investors Buy Shares in BBAI and INOD?
The stock market may be showing signs of volatility, but the AI sector's long-term growth trajectory is undeniable. As the "Second Wave" of the AI boom unfolds, identifying emerging leaders in this transformative industry is critical for investors. This wave of AI innovation is reminiscent of the late-90s tech boom. Just as Microsoft and Cisco built the internet’s foundational infrastructure, today’s leaders like Nvidia and Taiwan Semiconductor are shaping the AI landscape. But it’s the second wave of innovators—those leveraging AI foundations for unique applications—that could see explosive growth.
This wave of AI innovation is reminiscent of the late-90s tech boom. Just as Microsoft and Cisco built the internet’s foundational infrastructure, today’s leaders like Nvidia and Taiwan Semiconductor are shaping the AI landscape. But it’s the second wave of innovators—those leveraging AI foundations for unique applications—that could see explosive growth.
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