2 Hidden AI Stocks to Buy in the S&P 500 Sell-Off

It's no secret that artificial intelligence (AI)-related stocks have sold off in the recent market correction. It's partly due to investors locking in gains, competitive concerns relating to Chinese start-up DeepSeek, and, most notably, valuation concerns. Consequently, focusing on companies with relatively secure market positions that trade on tempting valuations makes sense if you want to buy on the dip.

Retail electricity and power-generation company, Vistra (NYSE: VST), and data center equipment maker, Vertiv (NYSE: VRT), fit the bill. Here's why.

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Vistra, data centers, and AI

Vistra was one of the best performing stocks on the S&P 500 (SNPINDEX: ^GSPC) last year, so it's no surprise that investors took some profit on it this year. Still, that doesn't mean the power company isn't an alluring stock to buy right now.

The excitement around the company is represented in the table below, which demonstrates how Vistra increased its generating capacity from nuclear and renewable energy last year. As a result of the acquisition of Energy Harbor and the acquisition of its outstanding 15% interest in Vistra Vision (the subsidiary that houses its nuclear business, and renewables and storage projects), Vistra significantly increased its nuclear powered generating capacity and also added to its renewable generating capacity.

Data source: Vistra SEC filings. MW=megawatts.

It's good news because the market, and more importantly, the hyperscaler data centers (large data centers often optimized to support data-intensive AI-application growth), have warmed to the idea that nuclear-powered electricity is the solution to their long-term power needs to support AI growth.

All three of the largest cloud service providers -- Microsoft's Azure, Amazon.com's Amazon Web Services, and Alphabet's Google Cloud -- inked deals last year to procure power for their data centers from nuclear-powered plants. Nuclear power is carbon-free, reliable, available 24/7, and doesn't have the downside issues of intermittency that characterize renewable energy sources.

It's a good solution for hyperscalers that want to solve their power needs and meet their emissions goals simultaneously. In addition, investors shouldn't overlook the ongoing electrification-of-everything megatrend (electric vehicles [EVs], web-connected devices, smart buildings/infrastructure, data centers, heat pumps, EV charging networks), which continues to drive electricity-demand growth before and after AI became a common talking point.

Image source: Getty Images.

Vistra investors can look forward to a deal with a hyperscaler, not least because CEO Jim Burke told investors on the last earnings call, "You can assume that we're speaking to all the major hyperscalers and that we're actively engaged with them and the major data center developers."

As for the threat from DeepSeek (a lower-cost AI model from a Chinese start-up), Vertiv's Executive Chairman David Cote argued on Vertiv's last earnings call that a lower computing cost (as in DeepSeek's model) implies more data creation and ultimately more data center/electricity demand. That's good news for Vistra, and the stock looks like a good value when trading on 19 times estimated 2025 earnings and with a potential hyperscaler deal to be signed.

Vertiv, data centers, and AI

Former Honeywell CEO, Cote is somewhat of an industrial sector legend, which gives investors reason to feel comfortable buying Vertiv stock. The Nvidia partner competes with the businesses housed in much larger companies in the market for critical power, thermal management, monitoring equipment, and services for data centers.

VRT Market Cap data by YCharts.

These are critical solutions for data centers. Vertiv continues to enjoy a boom in demand, with organic sales up 18% in 2024 and a 30% increase in orders, leading to a 30% increase in backlog to $7.2 billion. While the company did see some weakness in orders from Europe in the fourth quarter, this comes down to what management describes as a delay due to bureaucratic "red tape" rather than a reflection on underlying demand.

The dip in the share price has created a superb entry point into the stock, as Vertiv now trades on less than 24 times the midpoint of management's 2025 earnings expectations and less than 25 times its estimate for free cash flow in 2025. They are excellent valuations for a company expected to grow earnings at a 25% annual rate over the next few years.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Johnson Controls International, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.