1 Growth Stock Down 50% to Buy Right Now

Power Solutions International (NASDAQ: PSIX) caught the artificial intelligence (AI) tailwinds in early 2024 and rode them to stock price gains exceeding 5,950% by mid-September 2025. Since hitting that high, the stock price has fallen 47%, partially on market worries about the power system manufacturer's accounting practices.

Concerns about overstated revenue growth can undoubtedly shift the bullish narrative on the stock, but the company still has potential. For instance, insiders still own roughly 80% of the shares, indicating continued confidence from the people at the top. The company also continues to benefit from the artificial intelligence (AI) trend, and it continues to report outsized revenue growth. Add in that the stock doesn't have the type of lofty valuation that has commonly been a concern for AI stocks. Its price-to-earnings ratio is just 11.3.

Those reasons and more suggest the recent price drop may present a long-term buying opportunity. Let's take a closer look.

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How Power Solutions International fits into the AI industry

The company develops and produces power systems for industrial, energy, and transportation applications. While Power Solutions International expects demand from the industrial and transportation markets to remain flat, it projects significant growth in data center demand. Basically, as more AI data centers get built, Power Solutions International should experience rising demand for its wares.

In Q3, Power Solutions International's sales rose by 62% year over year to $203.8 million. Power systems sales increased by $85.3 million, while industrial and transportation end market sales decreased by $4.7 million and $2.6 million, respectively.

Management didn't provide exact breakdowns of how much each of these three segments earned in the quarter. However, an $85.3 million increase to existing power systems sales against a total of $203.8 million in revenue suggests that data centers now provide the bulk of Power Solutions International's top line.

Power Solutions will be in a good position to accelerate its revenue growth rates as more data centers are built. Furthermore, AI spending from big tech companies is also expected to rise in 2026, which should result in more demand for Power Solutions International's services.

PSIX has a solid balance sheet

Power Solutions International has a robust balance sheet that includes $318.9 million in total current assets and $139.9 million in total current liabilities. That comes to a 2.28 quick ratio, which indicates Power Solutions International can easily cover its financial obligations. In general, a quick ratio of 1.0 or higher is considered good.

The company told investors that it has $49 million in cash and cash equivalents and $96.7 million in total debt. It has enough money to fund additional investments while minimizing interest payments.

Power Solutions International has a strong financial profile and is a key beneficiary of the hottest industry right now. AI still has a multiyear tailwind as autonomous vehicles, robots, AI agents, and cloud platforms demand more energy.

Addressing accounting concerns

The main question that has stopped Power Solutions International's stock from rallying further is whether its numbers are real or inflated. The concern isn't without precedent, as the company's former CEO was charged with accounting fraud back in 2019. The company reached a settlement with the SEC in 2020 that resulted in some of Power Solutions International's executives being fired.

The company released its third-quarter report in early November, and management forecasted 45% sales growth for the full year despite reporting sales growth figures of 62% in Q3 and 74% growth in Q4. Some investors are calling for an investigation because the growth figures don't seem to add up. Investors are wondering why sales have suddenly dropped significantly after two quarters of growth acceleration. It should also be noted that Power Solutions International reported 42% revenue growth in Q1, which is more in line with the full-year forecast.

It is a bit shocking that the company forecasted just 45% sales growth without much explanation. It has still achieved strong growth for the year, but investors who are on the fence may want to wait for 2026 guidance. If the company projects much lower growth rates for 2026, especially if AI stocks remain hot due to sizzling sales, the bears will become much louder.

Should investors buy the dip?

Despite the 47% drop from 52-week highs, shares still trade about 114% higher in 2025 and are up by more than 1,770% over the past three years. It has been a hot growth stock. Oddly, its P/E ratio now looks a bit too low given its positioning to benefit from the AI industry. Hyper growth is still on the menu as big tech companies ramp up their spending. The crash looks overdone at current levels.

It should be noted that insiders have sold far more shares than they have bought this year, but that could be a reflection of longtime shareholders finally taking some profits from the two-year-long share price acceleration. Insiders still own roughly 80% of its total shares.

The people who know the most about the company are still holding the majority of their shares. If accounting fraud was rampant, insider selling would likely be much higher, as it wouldn't make sense for people who are in the know to hold 80% of the stock.

Investors who are still wary can wait until the company releases Q4 earnings and offers 2026 guidance before deciding whether to buy in. Power Solution International's long-term growth prospects should become clearer by then. However, the company is in an excellent position to capitalize on rising AI demand and has a healthy balance sheet. If sales start strong in 2026 and guidance is good, investors will forget about the current drama.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.