3 Resilient Artificial Intelligence (AI) Stocks That Did Well the Last Time the Fed Raised Interest Rates

The article assesses Nvidia, Palantir and Broadcom as AI beneficiaries that previously outperformed after the Fed's July 2023 rate hike, while warning that renewed tightening could curb AI spending and pressure equities. Nvidia generated $127B of trailing-12-month free cash flow and more than doubled latest-quarter sales, trading at 23x forward P/E; Palantir posted 93% revenue growth but trades near 80x forward P/E. Broadcom grew revenue 48% in its latest quarter, is down more than 30% from its $495 52-week high, and trades at an 18x forward P/E, making it the article's comparatively more attractively valued option.

Analysis

The relevant rate-risk distinction is not financing capacity but duration: NVDA and AVGO can self-fund investment, yet their multiples remain exposed to any upward revision in long-end real yields. AVGO has the better near-term setup if its discount reflects transient post-earnings positioning rather than a revision to hyperscaler custom-silicon demand; its diversified networking, software and ASIC exposure should make it less dependent on a single GPU capex cycle. NVDA remains the cleaner AI beta, but its incremental upside increasingly requires evidence that inference demand broadens beyond the existing hyperscaler cohort.

PLTR is the weak link in a higher-yield tape. Its valuation embeds sustained exceptional growth and leaves little room for deceleration in commercial bookings, deal duration, or government-contract timing; a modest multiple reset can outweigh operating upside over the next 1-3 months. Second-order beneficiaries of a rotation away from expensive application AI include quality infrastructure names such as AVGO and networking exposure through ANET, while AI software peers with similarly long-duration valuations could be vulnerable.

Contrarian view: a rate scare alone is unlikely to materially reduce committed data-center capex within a quarter; cloud providers make multi-year capacity decisions based on utilization and competitive positioning, not marginal policy-rate changes. The actionable question is whether AI monetization improves enough to sustain capex into 2027. Watch hyperscaler capex guidance, AVGO custom-ASIC backlog and NVDA networking growth; cuts or slowing order visibility would invalidate the resilience thesis, whereas stable guidance amid higher yields supports a quality-AI rotation.

Key Decisions for Investors

• Initiate a 1-3 month long AVGO / short PLTR pair, sized dollar-neutral: AVGO offers lower duration risk and multiple business lines, while PLTR has the greatest valuation sensitivity to rising real yields. Target 10-15% relative performance; exit if AVGO reports weaker custom-ASIC backlog or PLTR commercial growth reaccelerates materially above expectations.
• Maintain NVDA as core AI exposure but do not add into a broad yield-driven rally; add only after confirmation that 10-year real yields stabilize and hyperscaler capex guidance is maintained. Use a 8-10% downside stop or protective put spread through the next earnings cycle, since a networking or gross-margin miss would challenge the premium valuation.
• For a tactical 1-2 month expression of a higher-for-longer regime, overweight AVGO and underweight high-multiple AI software via PLTR or IGV. Falsification: a sharp decline in real yields or evidence that enterprise AI software bookings are accelerating faster than infrastructure spend.
• Set alerts for hyperscaler quarterly capex revisions and AVGO AI revenue/backlog disclosure. A broad capex reduction is the key 6-18 month risk to both AVGO and NVDA and would favor reducing semiconductor exposure rather than treating rate volatility as a buying opportunity.