Why the AI Stagnation Just Ended

Anyone who has been on Wall Street long enough understands that investors hate uncertainty. Although artificial intelligence is arguably the most groundbreaking technological boom since the internet buildout of the late 1990s, the industry has been plagued by uncertainty. Until the past week or so, these uncertainties caused AI stock prices to stagnate from late 2025. Below, I will list the key uncertainties that caused stagnation in AI stocks and why they are no longer a concern:

· The War in Iran: Geopolitical uncertainty causes an investor exodus out of high-growth, risk-on market areas like technology and into risk-off segments like defense stocks. That said, Monday, the market signaled that it was ready to move past these concerns. Although the U.S. and Iran failed to come to an agreement over the weekend, crude oil rose an unimpressive 3% on Monday. Meanwhile, although the Nasdaq started the session red, buyers stepped in, and the index closed up more than 1%. While the headlines remain scary, the price action indicates that the worst of the geopolitical concerns is likely behind the market. This price action mirrors historical norms, in which geopolitical concerns trigger a short-term price shock followed by a swift recovery.

· Energy & Memory Constraints: Massive data centers are required to power AI models. With an aging, already overwhelmed grid, the biggest constraint onthe AI buildout has been finding reliable energy. However, hyperscalers have stopped relying on legacy utility companies and are instead generating their own power via behind-the-meter (BTM) solutions (more on that later). Meanwhile, the second-largest constraint has been high bandwidth memory (HBM) solutions (which are required for data centers). However, memory producers like Micron (MU) and SanDisk (SNDK) are ramping up production to meet demand.

· Private Credit Fears: One of the biggest bearish talking points among investors regarding AI is private credit fears. Blue Owl Capital (OWL), an alternative asset manager and credit lender, recently sparked investor fears when Moody’s (MCO) downgraded its credit outlook from stable to negative. However, overall credit default rates are manageable, suggesting that industry-wide credit fears are overblown.

Although Wall Street investors only recently stopped selling stocks amid the Iran conflict, many AI stocks have already seen meteoric moves and are extended. For instance, over the past month, Applied Optoelectronics (AAOI) is up 65%, and SanDisk is up 38%.

Story Continues

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So, is it too late to buy AI stocks? The answer is “it depends.” While many AI stocks are already extended and should not be chased by investors, select AI stocks are just breaking out now amid fresh catalysts.

Through its unique technology, Bloom Energy converts natural gas, biogas, and hydrogen into reliable, always-on electricity. BE’s technology allows hyperscalers to bypass the traditional power grid and generate their own electricity for energy-hungry data centers. Monday, BE announced an expanded partnership with Oracle to support up to 2.8GW of fuel cell deployments for AI cloud and infrastructure. The deal represents the largest direct hyperscaler fuel cell commitment in Bloom’s history. Zacks Consensus Estimates already suggest Bloom will deliver triple-digit EPS growth for 2027, but these numbers will likely need to be revised higher in the coming weeks and months.

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Although BE shares gained more than 10% in after-hours trading on Monday, they will still be buyable Tuesday morning near the open as a catalyst-driven breakaway gap. As I mentioned in a recent commentary, the breakaway gap has been the top setup of 2026.

On the last earnings call, FSLY CEO Kip Compton highlighted that Agentic AI (autonomous agents) will drive demand for Fastly’s low-latency edge computing and security offerings. The stock jumped 72% on the news and tripled in just a handful of weeks. However, after running six of seven weeks, shares finally succumbed to gravity last week and plunged 30%. In my view, nothing has changed with FSLY’s story, and the first pullback to the 10-week moving average represents a dip buying opportunity for investors who missed the first stock price move.

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CoreWeave is a specialized cloud provider that delivers massive-scale, GPU-accelerated computing infrastructure designed specifically for AI model training. While CRWV was arguably the hottest IPO of 2025, shares dove by more than 50% as early investors and insiders used the lock-up expiration to dump shares. Additionally, investors worried about aggressive spending and wider losses at CRWV. However, these concerns came to a screeching halt last week when CoreWeave announced a landmark $21 billion expansion to its energy agreement with Meta Platforms (META). The META agreement is the single largest bullish catalyst in company history and boosts CRWV’s backlog to $87 billion, providing almost unprecedented revenue visibility. In fact, Wall Street analysts expect CRWV revenues to more than double in 2026.

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Meanwhile, CRWV shares are forming a bullish long-term bull flag pattern.

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Bottom Line

For months, a wall of worry including, the Middle East conflict, power grid exhaustion, and private credit fears kept AI stocks bottled up. But the tide has turned as geopolitical tensions subside, bottlenecks unwind, and demand soars.

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