Monday’s market turbulence saw significant losses across AI-related stocks and the broader technology sector, with the tech-heavy Nasdaq declining 3% as over a billion dollars evaporated from markets. Nvidia, Big Tech companies, and AI infrastructure plays including energy, utilities, and data center stocks all plummeted in the sell-off.
However, Bank of America analyst Wamsi Mohan argues that the market overreacted, particularly punishing IT hardware companies that have limited exposure to AI and data center spending. Mohan believes investors mistakenly equated all technology stocks with AI exposure, creating attractive buying opportunities for discerning investors.
The senior technology analyst identified four IT hardware stocks with “compelling growth drivers separate from Gen AI/data center spending” that declined more than the Nasdaq’s 3% loss, presenting ideal entry points:
Corning Incorporated (GLW) dropped 8.7% on Monday. The materials science company specializing in glass and ceramics is positioned to benefit from increased demand for optical carrier infrastructure in 2025. With partnerships secured with Lumen and AT&T, plus US government broadband expansion initiatives, Corning’s AI-related revenue is expected to remain below 2% of total revenue.
Hewlett Packard Enterprise (HPE) fell 5.8%. Bank of America anticipates a rebound in enterprise IT spending after years of cutbacks due to recession fears and interest rate concerns. The pending acquisition of Juniper Networks is expected to boost margins and earnings.
Western Digital Corporation (WDC) declined 4.5%. The data storage company plans to spin off its two main business segments—hard disk drives and flash-based products. Mohan estimates this spinoff could create $5-10 billion in value. Importantly, Western Digital’s flash business doesn’t heavily depend on server-related sales, reducing vulnerability to AI-driven demand fluctuations. Bank of America doesn’t view DeepSeek as a threat to hard disk drive demand.
Seagate Technology Holdings (STX) dropped 4.4%. The data storage specialist has seen impressive growth from new storage products. Mohan noted that “STX hasn’t been a beneficiary yet of the data growth driven by the AI models which is still to come,” with non-AI data center spending identified as a key driver.
The IT hardware industry has been trading at depressed valuations due to customer spending pullbacks in recent years. An anticipated cyclical recovery combined with Monday’s sell-off creates what Mohan calls a “perfect opportunity” to invest in hardware tech stocks at attractive prices.
Key Quotes
We don’t see the DeepSeek news as a new structural headwind
Wamsi Mohan, Bank of America’s senior technology analyst, made this statement regarding hard disk drive demand at Seagate. This is significant because it directly addresses market fears that DeepSeek’s cost-efficient AI models could reduce demand for data storage infrastructure, reassuring investors that traditional storage businesses remain insulated from AI market disruptions.
STX hasn’t been a beneficiary yet of the data growth driven by the AI models which is still to come
Mohan’s comment about Seagate Technology highlights that the company’s growth potential from AI-driven data storage demand remains largely untapped. This suggests upside potential while emphasizing that current business performance is driven by non-AI factors, making it less vulnerable to AI market volatility.
compelling growth drivers separate from Gen AI/data center spending
This phrase from Mohan’s Bank of America note encapsulates the core investment thesis—that certain IT hardware stocks offer value independent of the AI boom. This matters because it provides investors with a framework for identifying technology investments that aren’t subject to AI hype cycles and associated volatility.
Our Take
The market’s reaction reveals a critical insight about AI investment psychology: fear is as contagious as enthusiasm. When AI stocks tumbled, investors didn’t carefully parse which companies actually depend on AI revenue—they simply sold technology broadly. This creates exactly the kind of market inefficiency that sophisticated investors can exploit.
What’s particularly interesting is Bank of America’s timing. By highlighting non-AI tech plays immediately after an AI-driven sell-off, they’re essentially arguing that the market has created a discount on fundamentally sound businesses due to guilt by association. The emphasis on cyclical IT spending recovery and company-specific catalysts like M&A and business spinoffs suggests these stocks offer value based on traditional metrics rather than AI speculation.
However, investors should consider whether truly separating from AI exposure is possible in today’s interconnected tech ecosystem. Even “non-AI” hardware companies will inevitably be affected by broader technology spending trends influenced by AI investment priorities.
Why This Matters
This analysis is significant because it highlights how AI market volatility is creating ripple effects across the entire technology sector, even impacting companies with minimal AI exposure. The indiscriminate sell-off demonstrates investor anxiety about AI valuations and the potential impact of developments like DeepSeek’s cost-efficient AI models on the broader AI infrastructure buildout.
The Bank of America perspective reveals an important investment thesis: not all technology stocks are created equal in terms of AI dependency. While AI-focused companies face uncertainty about future spending levels and competitive dynamics, traditional IT hardware companies may benefit from separate cyclical recoveries in enterprise spending that have been delayed by macroeconomic concerns.
This matters for investors seeking diversification within the technology sector and for understanding how AI hype cycles can create both risks and opportunities. The identification of non-AI growth drivers in hardware companies suggests that the technology sector’s future isn’t monolithically tied to AI success, offering alternative paths to value creation. For the broader market, this analysis underscores the importance of distinguishing between AI-native businesses and traditional tech companies that may be unfairly caught in AI-related sell-offs.
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Source: https://www.businessinsider.com/tech-stocks-buy-the-dip-deepseek-data-center-ai-bofa-2025-1