Dan Ives Says the AI Trade Is Only in the "Third Inning." Should Investors Stay Long AI Stocks?

Last month, Dan Ives, partner and senior managing director at Yorkville Ives, said in an interview on CNBC that the artificial intelligence (AI) revolution is still in its early stages, comparing it to the third inning of a baseball game. He said Nvidia (NASDAQ: NVDA) remains at the center of the revolution, calling its processors the key technology driving the AI boom.

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Ives was not talking about hype on social media. He was pointing to real businesses. In his July comments, he highlighted CoreWeave (NASDAQ: CRWV) and Cisco (NASDAQ: CSCO) as "pieces of the puzzle" for the AI trade. CoreWeave is an AI cloud provider that builds data centers around Nvidia's graphics processing units (GPUs) and custom infrastructure, and rents that compute capacity out to its clients. Cisco sells networking hardware and software that connect servers and clusters within data centers and enterprise networks. Their recent results tell us that the spending in the AI build-out is spreading from chips into cloud platforms and into the plumbing that moves data.

Ives has kept using the "third inning" phrase on TV and in notes to clients, saying the AI story started with capital expenditures for chips, but that the space is now shifting into a monetization phase. That matches what we see with Microsoft's (NASDAQ: MSFT) Copilot seats, Meta's (NASDAQ: META) AI agents for businesses, Palantir's (NASDAQ: PLTR) AIP deployments, and a long list of other examples. Companies are no longer focused on buying GPUs. They are starting to charge customers for AI products that sit on top of those GPUs. Revenue is moving up the stack.

Ives likes to talk about every $1 of Nvidia spend turning into $8 to $10 of total spend across storage, networking, cloud platforms, and software. That multiplier shows why the trade has legs. AI infrastructure budgets are not one and done. In other words, once a company builds an AI factory, it has to run it, connect it, secure it, and feed it with data. Each of those needs touches multiple public names.

What does this mean for AI stocks?

So, should you stay long AI stocks? I think it's safe, with a focus on three buckets.

The first is core infrastructure, where Nvidia still occupies a unique position. Data center revenue is near $60 billion a quarter, and the full-stack system around its Blackwell platform tells us GPUs are still at the center of AI build-outs. https://cryptobriefing.com/nvidia-data-center-revenue-75-billion-q1/

The second is cloud and platform providers, where names like Microsoft, Amazon (NASDAQ: AMZN), and CoreWeave turn that hardware into services and consumption-based revenue.

The third is software and security, where companies such as Palantir are starting to show what AI-native applications look like at scale.

That does not mean every stock with "AI" in the press release deserves a long position. Ives himself runs an AI-themed exchange-traded fund that holds a concentrated group of infrastructure and application names rather than dozens of tiny experiments. The lesson I take from that is simple: Stay with the companies that either supply core compute, own the platforms where AI is used, or already have real AI product revenue and pipelines.

AI risks to consider

AI capex could slow if macro conditions tighten. Regulators are watching concentration in compute and data. Missteps in model safety could dampen adoption rates. None of that changes the direction of travel, though. Enterprises are building AI into workflows, and governments are funding national compute projects.

In that context, treating AI as a short-lived trade feels like a mistake. The better approach, in my view, would be to accept that we are still early in a long cycle, and decide which parts of that cycle deserve a seat in your long-term portfolio. If you stick to high-quality AI infrastructure, cloud, and software names with clear strategies and real customers, I think staying long AI stocks makes sense, and Ives's "third inning" comment is a useful reminder that this story is far from finished.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Cisco Systems, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.