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Along the border between Myanmar and China, wealthy collectors play a game with rocks.
The rocks are jadeite boulders. They are gray, dull, and roughly the size of a bowling ball. Pretty ugly things, honestly. While some contain a green jade worth millions, most contain nothing at all. But that is not the cruel part… for that, you cannot know which is worth millions and which is worthless until you pay full price and cut the stone open.
Wharton professors Christian Terwiesch and Karl Ulrich tell that story in The Innovation Tournament Handbook, and they add a twist. Imagine, they say, that for a small fee you could drill a tiny test hole first and sample the stone dust before committing your fortune. You’d no longer be gambling but investing… You invest a little to learn a lot. What’s more, your odds of finding the gem increase exponentially.
Think of the AI trade the same way.
After the selloff we have endured through the first half of 2026, the market is a pile of gray boulders. The fundamentals tell me some of these stocks are hiding serious jade. Triple-digit revenue growth. Expanding margins. Multibillion-dollar government contracts. But the tape is broken, and buying a stock in freefall is paying full price for an uncut stone.
Do not do it!
Drill the test hole first. Let the technicals confirm a bounce, and then buy.
On this week’s episode of Being Exponential, we ran five subscriber-submitted stocks through exactly that filter. Some passed. Some did not. And one gave us the clearest picture of how to play this entire correction. Let’s dig in.
The Gem With a Cracked Chart
Applied Optoelectronics (AAOI) has been hit hard. Very hard. We are down roughly 47% from the highs, matching the stock’s biggest pullback since this uptrend got going in the summer of 2025. We have lost the 50-day moving average. We have lost the 100-day. We broke the March high around $127 emphatically. Only the 200-day is still holding.
That is a cracked chart. No sugarcoating it.
But crack open the fundamentals, and the jade is glowing. We are talking about a company on track to grow revenues about 125% this year to more than $1 billion, then roughly 160% next year to nearly $2.7 billion, then more than 50% again the year after that. Gross margins march from about 30% toward 40% by 2028. EBITDA flips from a loss last year to a projected $500 million-plus by 2027. And you get all of that for about 34 times forward earnings.
There is nothing not to like in that setup. Fundamentally, I mean, it is gorgeous. But I do not catch falling knives. I buy bounces. So my two cents: Wait for AAOI to prove support, and buy the bounce off that support. That is the test hole. Drill it before you pay full price.
Trapped Under the 200
Palantir Technologies (PLTR) is the opposite lesson. A subscriber asked for the buy zone. Right now, there is not one.
Palantir is trapped under a downward-sloping 200-day moving average. It has hit its head on that ceiling once, twice, three times. Rejected all three times. And as the old saying goes, nothing good happens below the 200-day moving average.
The buy zone activates when PLTR retakes that line, currently around $158, and holds above it. Call it a commanding reclaim of the $155 to $160 zone. Until then, I am not constructive. You do not chase stocks that are crashing below the 200. Period.
The King of Outer Space Solar
A subscriber asked which company Elon Musk would tap as the solar infrastructure play for the SpaceX vertical: Redwire (RDW) or Ascent Solar Technologies (ASTI)?
Easy. Redwire has the proof. Redwire powers the International Space Station. Redwire has the contracts, the track record, the incumbency. In an innovation tournament, the later rounds reward the candidates who survive scrutiny, and Redwire has been surviving scrutiny in orbit for years.
Now, the chart demands honesty. I previously identified $15 as the buy zone, and we lost it. Not great. But the stock is holding the $10 to $11 area, where the 100-day and 200-day moving averages converge, and I believe that level holds. If you accumulated at $15, fine. If you missed it, this $10 to $11 zone is the next opportunity. And if we lose that level? Then you start questioning the bull thesis just a little bit. But I do not think we get there. Redwire over ASTI.
The Dual-Optionality Nuclear Play
Last week we covered BWX Technologies (BWXT), and a subscriber countered: Is Cameco (CCJ) the cheaper nuclear alternative?
I recommend Cameco, and here is the numbered logic. One: Cameco is a major uranium producer, and uranium demand rises as the nuclear buildout accelerates. Two: Cameco owns a large stake in Westinghouse, which recently won a massive U.S. government contract to build a fleet of new reactors on American soil. That is dual optionality. Commodity producer on one side, government-backed reactor buildout on the other.
The technicals? Challenged. We lost the 200-day, tried to regain it, lost it again. I do not love that action. But there is heavy support between $90 and $100, and I believe that floor holds and this trend reverses course. If we slice through $90 toward $80, the price action starts challenging the thesis. Until then, the fundamentals win the argument. Wait for the technicals to confirm the fundamental strength, and then act.
One quick word on Datavault AI (DVLT), because a subscriber asked: I do not mess around with 40-cent stocks, and you should not have to either. There are far better AI infrastructure plays out there that do not require digging through the penny bin.
Do Not Fight the Market
Zoom out. The semiconductor complex roughly doubled over a stretch of months, and now we are down about 10%. Painful? Sure. But historically, 10% to 15% pullbacks in the big AI infrastructure ETFs, like the VanEck Semiconductor ETF (SMH), are the buy zone. We are in that zone right now. History says this is a buying opportunity.
But history also says you wait for the drill sample. Do not buy until the tape confirms a rebound. Listen to the charts. The best way to lose money in the market is to fight the market. So don’t fight it. Get ready, watch for the bounce, and when the market confirms, get in the game.
Want the full breakdown, charts and all? Watch this week’s episode of Being Exponential, and drop your questions in the comments for a future show, or send them here.
