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Is this the beginning of new growth for the AI sector? Brian, I believe that last week was a period of maximum pain and pressure due to the very hawkish policy of the Fed. In addition, we had high oil prices and high interest rates. And, as you know, over the past few days and weekends, oil prices have fallen and rates have stabilized.
Now we have a maximally “ hawkish” Fed that can change its course. So I think there are all the prerequisites for a rapid take-off, especially given the oversold state. If you've been sitting on the sidelines since 2022, listening to the constant pessimists warning of an imminent market crash, you've missed more than just a regular rally.
You watched as the S&P 500 doubled from its late 2022 lows , breaking all historical records. Tom Lee from Fundstrat makes this quite clear. Holding cash now means being on the losing side of a once-in-a-generation boom. Despite the Fed's continued hawkish comments , high oil prices, and aggressive risk-off behavior by institutional investors in recent weeks, the stock market has made a powerful turnaround.
In just one trading session yesterday, the market giants skyrocketed. Advanced Micro Devices has surpassed the historic $1 trillion market capitalization threshold. Intel shares rose by double digits, while Meta Platforms continued its monthly rise, exceeding 25%. While late-stage investors chase hyperscalers already trading near record highs, institutional smart money is quietly preparing for the next phase of this multi-year expansion.
With Tom Lee predicting the S& P 500 will break through 8,000 by the end of the month, there is an extraordinary gap in the field of basic AI infrastructure . Today, three key market leaders —the founder of photonics, the dominant giant of network silicon technologies, and the undisputed global leader in semiconductor manufacturing— are trading at a rare discount of up to 25% from their summer peaks.
Buying these fundamental technology companies at a 25 % discount before they overtake the overall market offers the best opportunity for capital accumulation . Let's start with Coherent Corp, ticker COHR, a fundamental titan in the AI hardware ecosystem that recently experienced a sharp pullback of about 25 % from its summer highs, creating exceptional entry conditions.
While AI computing relies on the power of graphics processing units (GPUs), scaling these massive workloads requires advanced optical interconnect, where Coherent has a clear market advantage. At its core, Coherent designs and manufactures advanced photonic components, optical transceivers, and silicon carbide materials required for hyperscale data centers.
Coherent delivered exceptional financial results in its fiscal fourth quarter , surpassing the $2.05 billion quarterly revenue threshold for the first time in the company's history, up 42% year-over-year on a pro forma basis. The growth was mainly driven by the data center and communications segment, which now accounts for 79% of total revenue, up 58.60% year-on-year.
Operating leverage is dynamically expanding along with revenues. Non-GAAP gross margin rose to a record 40.20%, while adjusted earnings per share jumped 74.00% year-over-year to $1.74 per share. Looking to the future, Coherent is poised to deploy numerous high-performance catalysts. The company is actively transitioning to 6- inch indium phosphide wafer production at facilities in Texas and Europe, quadrupling component output at half the cost to meet surging demand for 800G and 1.6T optical transceivers.
Additionally , Coherent is expanding into next- generation optical switching, co-packaged optics, and Thermadyne high-performance cooling solutions designed to address overheating issues in high-performance AI clusters, supported by a multi-billion dollar strategic partnership with Nvidia, which has gained direct access to optical capabilities along with a $2 billion equity stake.
Coherent's long-term visibility remains exceptional. Management expects quarterly revenue to exceed $3 billion by fiscal 2027. With an extremely low forward PEG ratio of around 0.62, Coherent stands out as a major beneficiary, poised to reap significant returns as demand for connectivity grows. Next on the list is Broadcom Inc., ticker AVGO, a leading semiconductor giant that forms the structural foundation of global specialized AI silicon and high-speed data center networks.
Despite a nearly 25% pullback from its summer high, Broadcom today offers one of the most attractive risk- reward profiles in the technology sector. Broadcom's business model is built around two high-growth vectors: high-speed networking silicon for AI and dedicated AI accelerators known as XPUs. Broadcom is co-developing specialized chips with six elite advanced model developers, including Alphabet, Meta, Anthropic, and OpenAI, deeply integrating its silicon into their core software and , Broadcom generated an impressive $29.59 billion in total revenue, representing a year-over-year growth of 85.50%.
This revenue jump was driven by the AI semiconductor business, which grew 221% year-over-year and 54% quarter-over- quarter , while AI high-speed networking revenue grew 2.50x year-over- year. Broadcom retained an extraordinary 68.00% of revenue as operating profit , demonstrating world-class operating leverage that fully offsets the near-term pressure on gross margins caused by rising memory costs.
Looking ahead, Broadcom's growth trajectory is exceptionally clear. The company has ambitious plans to deploy multi-gigawatt AI capacity by 2028 across its major hyperscale partners. To address packaging and component shortages in the industry, Broadcom is increasing strategic capital investments to $1.40 billion quarterly, doubling its laser manufacturing efforts and expanding its advanced packaging capabilities in Singapore.
Free cash flow margin remains hyper-efficient at over 45.00%, providing tremendous flexibility to fund expansion and support future shareholder returns. As the industry shifts heavily toward inference workloads, where specialized chips have significant cost and performance advantages, Broadcom is at the center of this long-term shift.
After a recent pullback, Broadcom shares are —just 18.45 to expected fiscal 2027 earnings and less than 11.70 to consensus estimates for 2028. With earnings forecast to grow by over 60% in the coming years, Broadcom offers an unbeatable combination of structural advantage , hyper-yield, and deep fundamental valuation.
First on the list, completing our trilogy, is Taiwan Semiconductor Manufacturing Company, ticker TSM. The unrivaled leader among the world's advanced semiconductor foundries. Trading at a significant discount to its recent highs, despite a market capitalization jump of over a whopping $2.05 trillion, TSM maintains an absolute monopoly on the physical production of cutting-edge AI accelerators.
TSM serves as the exclusive manufacturer, producing advanced silicon for technology giants such as Nvidia, AMD, Apple, and Broadcom. In its latest quarterly report, TSM earned a staggering 1.27 trillion New Taiwan dollars, or approximately 40 billion US dollars, showing a year-on-year revenue growth of 36.05%.
The level of profitability remains unmatched across the entire technology sector. TSM maintains an extraordinary EBIT margin of 56.08% and a net margin of 49.82%, generating $82.80 . Importantly, the pessimistic narrative that had dominated Arizona expansion for years has completely reversed . In the first half of 2026 alone, TSM's Arizona operations generated a huge profit of NT$36.06 billion ( US$1.13 billion), more than double the profit for the whole of 2025, demonstrating tremendous pricing power and rapid growth in end- of-life product yields.
Looking ahead, TSM is not limited by market demand, but solely by physical production capacity. At the Semicon Taiwan conference, management reported that equipment orders have increased by 90% in just eight months, and nearly 20 new "gigafactories" are currently being built simultaneously around the world.
Additionally, TSM 's proprietary CoWoS advanced housing lines are fully sold out through 2027 , ensuring an uninterrupted multi-year revenue stream. From a valuation perspective, Wall Street gives TSM a Strong Buy rating with a consensus score and a near-perfect quantitative score of 4.93. The stock trades at an impressively compressed forward P/E ratio (non-GAAP) of 25.67 times and a PEG ratio (GAAP) of just 0.54.
At a 15.75% discount to the broader technology sector, despite projected long-term annual EPS growth rates exceeding 38.28%, forward revenue growth exceeding 37.73%, and gross margin growth of up to 65%, TSM is the most profitable fundamental investment across the entire AI value chain . These three structural giants— Coherent, Broadcom, and TSM— form the fundamental foundation of the AI revolution, offering a rare 25% discount on entry just before the next historic stage of market growth.
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