AI and semiconductors are the headlines right now. Chips are rising, data center construction stocks are making new highs, and the powerful crowd is firmly in control. But beneath the seemingly healthy market, something strange is happening. New lows were crossing new highs as the S&P 500 pushed above 7,500. That is not a healthy market. That is small.
TradeSmith's Jeff Clark has seen this setup before. His reading: when the profits are concentrated in a small part of the market, exchange trading comes. And if it does, the money running on hot names has to go somewhere. He thinks it's going into the cell that's been left behind—and he has three specific words in mind.
Setup: When Enthusiasm is Reduced to Infinities
The AI stock bull case is not a myth. The real money is going into data centers, chips, and infrastructure. The question Clark asks is different: for how long? Once a data center is built, you don't build another one next door. Memory chips are a cyclical commodity—but the market has priced them as if the cycle were frozen forever. Clark's view is that the market is extending today's spending to infinity, and that a correction is overdue. That doesn't mean AI trading is over. It means that easy money on hot names can already be made, and the opportunity is now sitting in the stock no one is talking about.
Figma: A Software Survivor with a Dead Man's Value
Figma Today
- 52 week interval
- $16.60
▼
$142.92
- Target Value
- $38.63
Figma NYSE: FIG went public at $33 a share, peaked at more than $140, and has since recouped nearly all of those gains—it spent a period near $20 before recent earnings brought it back above $22. The bottom line is that software is under pressure from AI, and Figma is getting caught in that wave. Clark's reading is probably the opposite.
Figma is not destroyed by AI. It covers it. The platform, used by designers and product teams to build digital products and prototypes, relies on AI tools rather than ignoring them, and the results are visible in the numbers. The company's user base is growing more than 50% year over year, and its latest earnings report came in at 10 cents per share compared to an expected loss of 17 cents. Total dollar savings increased to 139%, meaning existing customers are spending more. Income growth is accelerating, not slowing down.
For Clark, the thesis is simple: the stock was never worth $140, but it wasn't worth leaving either. At around $20, it's a scary price and not enough for what the business actually does. His target entry is around that level, and he considers it a name worth holding for a long time.
Kratos Defense: A Pure-Play Drone That Got Ahead of Itself
Kratos Defense & Security Solutions Today
Kratos Defense & Security Solutions
As of 05/20/2026 04:00 PM Eastern
- 52 week interval
- $34.06
▼
$134.00
- The P/E ratio
- 328.35
- Target Value
- $96.28
The story of the expansion of the defense budget is real, and Kratos Defense & Security Solutions NASDAQ: KTOS it stays in its center. The company's unmanned aerial systems—flight-powered drones, hypersonic vehicles, and related defense technology—have the Department of Defense as their primary customer, and that customer is spending aggressively. Kratos reported revenue growth of 22.6% in its most recent quarter, with a record backlog and upbeat guidance for the full year.
But the stock went from about $35 last year to $120 at its peak, then regained most of that. It trades around $53 today, which Clark admits isn't cheap by traditional metrics. This is not a value stock in the Graham-and-Dodd sense. He says this is what it is, a growth stock with earnings growing north of 45% a year, trading at a steep discount to where market sentiment had set it a few months ago.
Clark's preferred entry is closer to $45 to $50. The defense sector as a whole has retreated since the start of 2026 as investors are anticipating an increase in revenue that will come mainly from earnings. Clark sees that patience as a setup. The use of Drone technology is endless, and the pullback creates better penetration than anything available while KTOS is making headlines.
SoundHound AI: Round Trip Ticket, Best Place
SoundHound AI Today
As of 05/20/2026 04:00 PM Eastern
- 52 week interval
- $5.83
▼
$22.17
- Target Value
- $14.93
SoundHound AI NASDAQ: SOUN put investors on a full round trip. Last year, the stock traded near $8, ran into the low $20s on AI enthusiasm, and then retreated to around $8. Anyone who has shopped near the top knows exactly how painful that ride has been.
But Clark's focus isn't where the stock was; whether this entry price is reasonable compared to what the company is building.
SoundHound's technology is a conversational AI voice layer embedded in cars, restaurants, and consumer devices—software that responds when a driver requests a nearby gas station or a customer places a voice order. The company has yet to make a profit. What it is, Clark says, is doing the right things in practice: growing revenue, expanding into new contexts, and positioning itself as the pure play leader in voice AI in a value space that doesn't show anything of what's possible. At $8, the stock is trading where it was before the first wave of AI enthusiasm, and the business is significantly bigger now than it was then.
The risk is real, as profits remain at a minimum, and the stock has shown volatility in both directions. But for investors who believe that voice AI will become embedded infrastructure, Clark's argument is that a trip back to $8 is exactly the kind of entry point a “buy low, sell high” was created for.
Big Picture
These three words share a common thread: each has run too far in real passion, has retreated beyond what is basic to us, and now sits in an uncomfortable place where patience is needed. That discomfort is the point. Stocks generating today's headlines have a price of perfection. This isn't—and for investors willing to wait for the turnaround Clark sees coming, that gap may be where the opportunity lies.
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