Profitable AI stocks 1 to connect data 1 to cool racks 1 to command governments

AI is no longer just a buzzword. That’s starting to show up in real earnings and profit lines, as investors grapple with inflation risks, fluctuations in energy prices and changing interest rate expectations among major central banks. With mixed signals from bond markets and global growth indicators, many investors are looking for companies that are not only investing in AI, but are already converting that investment into revenue. This article focuses on three stocks in our “Profitable AI Stock Screener.” Each stock uses AI in ways that are already tied to cash generation, rather than pure experimentation.

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overview: Astera Labs designs and sells semiconductor-based connectivity hardware and software that links high-performance cloud and AI data center infrastructures with smart retimers, cable modules, fabric switches, and the COSMOS management platform, helping hyperscalers and equipment manufacturers efficiently move and manage data.

operation: Astera Labs generates approximately US$1 billion in revenue entirely from semiconductors, with sales spread across Singapore (US$336.7 million), China (US$301.2 million), Taiwan (US$263.8 million), the United States (US$39.1 million), and the rest of the world (US$60.7 million).

Market capitalization: $63 billion

Astera Labs is at the heart of the AI ​​data center, and its Scorpio switches, Aries and Taurus connectivity products, and COSMOS software are directly tied to building hyperscalar infrastructure and high-speed standards such as PCIe, CXL, Ethernet, and UALink. Earnings growth has been very strong, with current margins of around 26.7%. Analysts expect sales and profits to grow faster than the U.S. market and the broader semiconductor sector, which helps explain why valuations are weighing metrics such as P/B. At the same time, customer concentration, rapid technology change, and recent insider selling highlight that expectations are high and execution risks are real. The important question for you is: How long will this AI connectivity opportunity actually last?

Astera Labs sits at the intersection of AI demand, strong margins, and premium P/B valuations. The real story is how the balance between ambition and execution risk stacks up with 2 important rewards and 2 important warning signs.

overview: Through brands such as Vertiv, Liebert, NetSure and Avocent, Vertiv Holdings Co supplies power systems, liquid and air cooling, racking and software to keep data centers and communications networks running, including the networks behind AI, e-commerce, cloud services and online gaming, to more than 100 countries.

operation: Vertiv derives the majority of its revenue from the Americas, approximately $7.0 billion, with additional revenues of approximately $2.4 billion from Asia Pacific and approximately $2.3 billion from Europe, the Middle East and Africa, partially offset by intersegment eliminations of $973.8 million.

Market capitalization: US$114.4 billion

Vertiv is located where the demands of AI meet hard infrastructure, supplying liquid cooling and power systems that are becoming essential as GPU racks consume more than 100 kilowatts each and water usage comes under scrutiny. Fiscal year 2025 revenues of US$10.2 billion and backlog of US$15 billion, and recent first quarter 2026 revenues of US$2.65 billion and net income of US$390.1 million demonstrate how closely the company’s business is tied to current data center construction. Financial strength is enhanced by high profit margins, strong free cash flow and investment grade credit. At the same time, rich valuations, dependence on a small number of hyperscalar customers, and increased competition in the liquid cooling space means expectations are high and potentially major setbacks. Therefore, it is important to understand the balance of these factors before proceeding.

Vertiv’s surging AI infrastructure, high margins, and strong free cash flow have many investors paying attention to the headlines, but the real tension lies in its valuation and reliance on hyperscalers. Take a look at our analysis report for Vertiv Holdings Co before deciding how the trade-offs stack up.

overview: Palantir Technologies provides data and AI software platforms that enable governments and businesses to integrate vast amounts of information to support security, defense, and daily operational decisions. The company’s Gotham, Foundry, Apollo, and artificial intelligence platform products are used to transform complex data and real-world processes into tools that enable analysts, frontline staff, and AI agents to act quickly.

operation: Palantir generates approximately US$2.8 billion from government customers and US$2.5 billion from private customers, with most of that revenue coming from the US and the remainder distributed to the UK and other international markets.

Market capitalization: $314.2 billion

Palantir is often described as being at the heart of the AI ​​story as an “operating system” for critical decision-making. The company has very high profit margins, strong sales and profit growth, and a cash-rich balance sheet with no debt. This combination helps explain why the stock’s valuation multiple is rising, and why recent insider selling and reliance on external borrowings for debt are deterring some investors. Add in political and regulatory scrutiny over contracts such as the UK’s NHS data platform, and you have a business with notable AI deployments and government ties, but not without controversy. The key question is: Does the combination of growth, profitability, and concentration risk justify the current price, or could it be exposed to disappointment later on?

Palantir’s combination of high profit margins, government ties, and AI hype has divided investors, but the real story is how expectations align with what analysts expect for Palantir Technologies, and what could be overlooked next.

The three stocks in this article are just one example of the AI ​​cash cow story. In full screen view, you’ll see 58 more companies in our profitable AI stock screener that combines real cash generation with AI-driven business models. Use Simply Wall St to identify and analyze the catalysts, rating preferences, and stories that matter most to you, so you can focus on the ideas with the highest conviction instead of sifting through the hype.

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If Astera Labs or one of these companies catches your attention, sign up for free on Simply Wall St and add your company to your watchlist to monitor the stock’s price relative to fair value and track any new developments. Once migrated, manage your holdings with a portfolio command center that filters out the noise and delivers only the most important and actionable updates. Our community allows you to filter the best ideas from thousands of investor perspectives throughout your journey. Discover hidden catalysts and risks early to accelerate decision-making and stay ahead of the market.

Look for fresh alternatives before you fly

While some stocks are already building breakout momentum, others have flown under the radar for now, and the best entries will hardly wait. Check out these fresh ideas and act quickly if they fit your strategy.

• We identify quick turnarounds and potential multibaggers by scanning 24 elite penny stocks with strong financials that combine small market caps with realistic balance sheets and cash flows.
• Channel your curiosity into sectors most investors ignore by reviewing 20 quality undiscovered gems that combine quality fundamentals with stories yet to be recognized by the market.
• We filter out staying power before the crowd catches on by focusing on resilient balance sheets and low historical risk scores, and checking out 70 resilient stocks with low risk scores.

This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.

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