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Last week saw a selloff of technology stocks that may have spooked investors. Yorkville Ives analyst Dan Ives isn’t afraid of the pre-Halloween selloff and reminds investors that the AI trade may still be early.

AI Trade in Early Innings

Not all tech companies are created equal when it comes to the AI trade, Ives warns investors in a new note.

"This was a nightmare week for tech investors with software stocks under major pressure, and we are not going to pretend otherwise," Ives said.

The analyst highlighted some software stocks that are seeing slower growth and disruption from AI. Some companies, such as ServiceNow (NYSE:NOW), saw AI-related revenue rise before the selloff.

Ives said ServiceNow raised its full-year AI target for a second time, but management’s tone has softened on AI demand, similar to 2024.

"The companies that turned cautious in 2024 all reported a larger AI number within four quarters, while the 2026 group already has," Ives said.

The analyst said this comes as Wall Street has added $866 billion to its 2027 hyperscaler capital expenditure estimates.

"We remain bullish on software and cybersecurity into 2027, and we would be buyers of this week’s sell-off… selectively," Ives said.

Ives said AI is converting to software revenue on a two-year lag.

Ives’ Top Stock Picks

After the selloff, Ives is sharing what he believes are the best AI stocks across several sub-sectors.

• Chips: Nvidia Corp (NASDAQ:NVDA)
• Hyperscalers: Microsoft Corp (NASDAQ:MSFT)
• Software: Palantir Technologies Inc (NASDAQ:PLTR)
• Cybersecurity: CrowdStrike Holdings Inc (NASDAQ:CRWD)
• Consumer Internet: Apple Inc (NASDAQ:AAPL)
• Physical AI: Tesla Inc (NASDAQ:TSLA)

"Each sits where demand is contracted, funded, and accelerating, and together they give investors exposure to the AI buildout into 2027 without having to pick the winner of the application-layer shakeout," Ives said.

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