Investors tread carefully amid AI stock dip

The first half of 2026 has left AI stocks uneven, resembling uncut jadeite boulders—gray, dull, and difficult to value. Some hold hidden value, while most do not. The difference becomes clear only after taking a risk, and by then, the investment is already made.

Wharton professors Christian Terwiesch and Karl Ulrich compare this uncertainty to mining in The Innovation Tournament Handbook. Their solution is to test first by paying a small fee to sample the potential before fully committing. The approach increases the chances of finding a worthwhile opportunity. The current AI selloff follows the same logic.

Waiting for the bounce

Applied Optoelectronics (AAOI) has dropped 47% from its summer 2025 peak, matching its deepest pullback of the cycle. The 50-day and 100-day moving averages have collapsed, leaving only the 200-day as weak support. Despite the broken chart, the company’s financials stand out: revenue surged 125% this year to over $1 billion, with projections reaching nearly $2.7 billion next year. Gross margins are climbing from 30% toward 40% by 2028, while EBITDA shifts from a loss last year to a projected $500 million-plus by 2027. The forward earnings multiple is 34.

Do not catch falling knives. Wait for AAOI to prove support, and buy the bounce off that support.

The 200-day rule

Palantir Technologies (PLTR) demonstrates a different lesson. A subscriber requested the buy zone, but none exists yet. The stock remains trapped below a downward-sloping 200-day moving average, rejected three times at $158. Trading below that line offers no advantage. The buy zone opens only when PLTR reclaims $155 to $160 and sustains it. Until then, the setup remains unfavorable.

Redwire (RDW) outperforms Ascent Solar Technologies (ASTI) in the Elon Musk solar infrastructure debate. Redwire supplies power to the International Space Station, holds key contracts, and has proven reliability in orbit. Its chart is imperfect—$15 was the initial buy zone, now lost—but the stock holds between $10 and $11, where the 100-day and 200-day moving averages meet. If that level breaks, the bull case weakens. If it holds, the next entry point emerges.