An analyst's guide to picking AI stock winners and avoiding losers

Last week's software-led tech rout served as a reminder that AI hype is not lifting every stock, and investors should focus on careful stock picking as winners and losers emerge. Futurum Group CEO Daniel Newman described the sell-off as a "healthy, overdue rotation and a market demanding receipts," and advised investors to "ignore hype and look at growth and constraints." Newman looks first for AI spending that actually translates into revenue.

He notes that the $470+ billion hyperscalers are spending this year must produce returns, pointing to Amazon and Microsoft as examples where AI investment is driving real cloud revenue through AWS and Azure. Companies that build their own silicon also have an edge, Newman says, because in-house chips offer capacity advantages and vertical integration that can improve margins.

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