These 3 AI Stocks Are Way Off Their Highs. Is the Pullback a Buying Opportunity?

Vertiv, Applied Optoelectronics, and Innodata entered September well below their 2026 highs despite strong operating growth. The pullbacks do not make them interchangeable bargains. Vertiv Holdings Co. (NYSE: VRT ) sells power and cooling, Applied Optoelectronics, Inc. (NASDAQ: AAOI ) supplies optical transceivers, and Innodata Inc. (NASDAQ: INOD ) provides data engineering and model-evaluation services.

Vertiv's second-quarter sales rose 24% to $3.27 billion, adjusted operating margin expanded 410 basis points to 22.6%, and adjusted free cash flow reached $925 million. The bull case is rising power and thermal content per AI rack. The bear case is project timing, supply congestion, and expectations built around long-duration demand. Insider Monkey counted 112 hedge funds holding Vertiv Holdings Co. (NYSE:VRT) in Q2, up from 96 in Q1. Cliff Asness's AQR Capital reported 2,686,683 shares, 0.5% more sequentially.

Applied Optoelectronics posted record revenue of $191.9 million, while 800G volume more than doubled from Q1. Management expects 800G and 1.6-terabit demand to exceed production capacity through mid-2027. That capacity ramp is the bull case; a 27.7% GAAP gross margin, a $22.8 million GAAP loss, customer concentration, and execution are the bear case. Fifty-four hedge funds held Applied Optoelectronics, Inc. (NASDAQ:AAOI), down from 55. Value Aligned Research disclosed 1,595,124 shares, 26% more sequentially.

Innodata's revenue grew 58% to $92.1 million and adjusted EBITDA rose 92% to $25.4 million. Its reusable data sets and evaluation work can expand margins, but large-customer dependence and rapidly changing model-training methods create risk. Twenty-five hedge funds held Innodata Inc. (NASDAQ:INOD), up from 20. Mitch Rubin's RiverPark Advisors reported 2,042 shares, 18% more than in Q1.

AAOI's August 14 short-interest settlement showed 10,421,985 shares sold short, equal to 12.81% of float, with 0.69 days to cover..The elevated short-float percentage signals substantial bearish positioning, while the low days-to-cover ratio suggests shorts could cover relatively quickly at recent trading volumes.Vertiv has the strongest cash generation, AAOI the sharpest capacity upside, and Innodata the lightest physical footprint. A buying opportunity exists only if margins, customer diversification, and cash conversion justify each stock's remaining expectations. The risks also differ in timing. Vertiv can lose on delayed data-center construction, AAOI can lose during the manufacturing ramp, and Innodata can lose when a major customer changes vendors or training methods. Investors should therefore avoid using distance from a high as valuation analysis. Order conversion, gross-margin durability, customer concentration, and diluted share growth are the comparable checkpoints. The pullback improves entry prices, but only operating evidence can establish value. Balance-sheet resilience matters most when capacity plans meet a weaker cycle.

While we acknowledge the potential of VRT as an investment, we believe certain other AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock .

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