Three Stocks Soar on AI Boom, Three Lag Behind

The stock market has continued its upward trajectory since our last CNBC Investing Club Monthly Meeting, although underlying leadership has shifted. The Dow Jones Industrial Average led the advance, gaining 2.3% between June 17 and Wednesday’s close. The 30-stock index even reached a record high on July 6 before experiencing a slight pullback in recent days. The S&P 500 saw a gain of 2.1% during the same period, while the Nasdaq Composite posted a more modest 1% increase.

Investors are exhibiting increasing selectivity regarding their artificial intelligence (AI) exposure, a trend underscored by recent market movements. Cybersecurity stocks, in particular, have experienced another leg higher over the past month. This resurgence follows a period of recovery from their late 2025 decline into the spring of this year, as Wall Street’s newest AI darlings solidified their position as beneficiaries rather than victims of the AI revolution. Companies demonstrating a clearer path to monetizing their substantial AI investments have also attracted significant buyer interest. Concurrently, a rotation into more defensive market sectors has occurred, driven by renewed geopolitical concerns related to the Iran conflict, which has added another layer of market uncertainty.

Ahead of our July Monthly Meeting livestream, here’s an examination of the top and bottom performers since our previous gathering.

### Top Performers

**Palo Alto Networks (PANW) up 25.5%, CrowdStrike (CRWD) up 21.7%**

These two cybersecurity powerhouses both reached record highs since our last monthly meeting, cementing the sector’s status as an AI winner. Earlier this year, investor sentiment leaned towards AI being a disruptive force for the cybersecurity industry. However, the prevailing view has now shifted to AI increasing the demand for cybersecurity solutions. This narrative gained significant traction following reports in April that advanced AI models were becoming adept at identifying software vulnerabilities, reigniting concerns about AI-powered cyber threats. The recent rally was further propelled by a Wall Street Journal report highlighting that Chinese AI models are now nearly as capable as leading U.S. platforms in this regard. Rather than perceiving this as a direct threat, investors interpreted it as an additional impetus for companies to increase their spending on robust defense systems.

IBM CEO Arvind Krishna provided another boost to Palo Alto Networks and CrowdStrike this week when the company preannounced disappointing second-quarter results. Krishna indicated that cybersecurity is among the top three IT spending priorities for businesses, a sentiment that resonated with investors looking for strong secular growth trends.

We took advantage of the sharp run-up in both stocks to trim our positions, realizing gains of nearly 150% in Palo Alto Networks and 105% in CrowdStrike, while maintaining our long-term conviction in both companies. Both stocks are currently trading near all-time highs.

**Meta Platforms (META) up 20%**

The parent company of Facebook and Instagram has staged a remarkable turnaround, transforming from one of our laggards heading into June’s meeting to a top performer ahead of July’s. This shift was catalyzed by Meta finally providing investors with greater confidence in its strategy for monetizing its vast AI investments. Recently, Meta announced plans to launch a cloud computing business that will offer its excess computing capacity to external clients, a move that has been long advocated for. The company has also introduced new AI products for developers and advertisers, signaling a broader pivot towards generating revenue from its AI capabilities, moving away from a primary reliance on open-source releases. Reports from Reuters also indicate Meta’s intention to commence manufacturing its custom AI chips later this year, a strategic move aimed at bolstering its computing power. Following this news, a Bank of America analyst suggested that Meta’s custom chip endeavors could lead to substantial cost savings. The firm had previously estimated Meta’s spending at approximately $45 billion per gigawatt of computing capacity, but now believes this figure could be closer to $22 billion. These announcements collectively drove Meta’s stock up 15% last week, making it the best-performing stock in our portfolio during that period.

**Apple Inc. (AAPL) up 10.7%**

The iPhone maker experienced a rebound during this period as investor confidence in its AI strategy grew. Earlier this year, Apple announced a multiyear partnership with Alphabet to integrate Google’s Gemini into Apple Intelligence, alleviating concerns that Siri had lagged behind its AI assistant competitors. This optimism was further solidified at Apple’s Worldwide Developers Conference in June, where the company showcased its revamped AI platform. The demonstration reinforced the view that Apple may not need to develop the industry’s leading AI model if it can deliver a superior user experience across its substantial installed base of approximately 1.5 billion iPhones. The market has also embraced the idea that Apple can participate effectively in the AI race without depleting its free cash flow. The stock experienced a minor setback in late June following Apple’s announcement of price increases across its MacBook and iPad lines, attributed to rising memory costs rippling through the technology sector. While some analysts warned that these price hikes, combined with reduced wireless carrier subsidies, could slow device upgrades and pressure future growth, others argued that the higher prices should largely offset increasing memory costs with minimal impact on demand. We continue to view Apple’s evolving AI roadmap as a significant long-term catalyst, particularly in anticipation of the broader rollout of Apple Intelligence later this year. The stock closed at a record high on Wednesday.

### Bottom Performers

**Intel Corporation (INTC) down 15%**

The semiconductor giant experienced a pullback from its record high during the period as investors rotated out of several chip names following a strong rally. We took advantage of this weakness to increase our position on Wednesday, viewing the decline as a buying opportunity rather than an indication that the AI trade is losing momentum. Intel remains a favored stock due to its expanding opportunities in AI-driven central processing units (CPUs) and its foundry business. Despite a challenging month and ongoing pressure on Thursday, Intel is still up over 170% year to date.

**FedEx Freight (FDXF) down 12.4%**

The less-than-truckload (LTL) leader has faced headwinds since becoming an independent company in early June. However, we believe this weakness reflects a typical post-spin-off pattern rather than deteriorating fundamentals. Many shareholders who received the stock through the separation likely opted to sell, creating short-term selling pressure. The company’s initial earnings report as a standalone entity was somewhat unconventional due to the transition to calendar-year reporting, but revenue and operating income both surpassed expectations. Margins, however, contended with the same fuel surcharge challenges that impacted its former parent company. We continue to see FedEx Freight as a long-term winner and have utilized recent pullbacks as opportune buying moments. As the largest LTL player in North America, FedEx Freight is well-positioned to capitalize on a recovering freight cycle.

**Qnity Electronics (Q) down 10.5%**

Similar to Intel’s recent performance, this DuPont spin-off gave back some of its recent gains as semiconductor stocks cooled off after an exceptional run earlier in the year. The downturn accelerated following Samsung Electronics, Qnity’s largest customer, reporting earnings that, while described as “superb, but not superb enough,” raised questions about demand for Samsung’s products. This sentiment sent Qnity shares down approximately 4% in the subsequent trading session. We view this sell-off as a short-term market reaction rather than a fundamental shift in our long-term thesis. Despite the recent pullback, Qnity is still having a strong year, with gains of roughly 70% year to date.