We just published a list of the 10 Stocks Analysts Just Upgraded and South Bow (NYSE:SOBO) ranked 7th on this list.
Wall Street spent last Thursday reminding investors how quickly a favorite theme can turn. Worries that Democratic midterm wins could bring tighter rules for artificial intelligence and data centers sent technology stocks sharply lower. The damage spread well beyond the group that was under the microscope.
The Nasdaq Composite fell 5.52%, its biggest one-day drop in 19 months, and closed more than 10% below its October record, a slide that put it in a correction. The S&P 500 lost 4.36%, its worst drop since the April 2025 tariff shock, and the Dow Jones Industrial Average slid 3.44%. The drop more than erased the previous day's gain, the market's best in three months.
Trading was frantic. About 26.9 billion shares changed hands, against a 20-session average of 17.7 billion.
Charts
Chip Stocks Take the Heaviest Hit as AI Build-Out Fears Spread
Semiconductor stocks absorbed the worst of it, and the selling was heavy in the other stocks tied to data center spending too. The Philadelphia SE Semiconductor Index dropped more than 12%, and S&P 500 companies lost about $3 trillion in market value in one session. Even so, the S&P 500 was still up 7.4% for the year, and the Nasdaq Composite was still up 4.6%.
"This feels like the capitulation phase for the data center capex beneficiary stocks, especially the semiconductors," Argent Capital Management portfolio manager Jed Ellerbroek told Reuters . Melissa Brown, global head of investment decision research at SimCorp, said investors were starting to price in the chance that newly elected lawmakers would slow the build-out. Our ranking of oversold AI stocks where Wall Street analysts are spotting 50% or more upside covers more of the group.
Rate Worries and Oil Add Another Layer of Pressure
The selling landed on top of a tightening cycle. Cleveland Fed President Beth Hammack and Richmond Fed President Thomas Barkin both hinted at possible future rate hikes. Traders expected the Federal Reserve to raise rates again next month after a September increase.
Energy prices added to the strain. Brent crude rose 3.9% to $98.29 a barrel, while the 10-year Treasury yield slipped to 4.83% from 4.90%. Readers who follow analyst calls on value can find more ideas in our list of affordable stocks that Wall Street analysts like .
Overseas, the Bank of England raised its main rate for the first time in three years. Governor Andrew Bailey said, "The best thing that can happen is to resolve the conflict in the Middle East; there's no question about it."
South Bow made it to our list because it drew an analyst rating upgrade on Monday, November 9, and has an average upside potential of 10%.
TD Cowen analyst Aaron MacNeil upgraded South Bow to Buy from Hold on Monday, November 9, with a C$51 price target. MacNeil's reasoning is valuation and income: the stock has fallen sharply from its July highs, and its dividend yield of about 6.4% is the highest among the Canadian midstream companies he covers.
South Bow operates crude oil pipelines, including the Keystone system. About 90% of its cash flow is contracted, which limits exposure to oil price swings. In the third quarter, net debt to normalized EBITDA fell to 4.3 times, and TD Cowen expects it to move toward 4.0 times. The firm also sees upside from the proposed Prairie Connector pipeline.
That project carries timing risk. South Bow does not expect a final investment decision on the Prairie Connector or the Liberty Bridge pipeline until the middle of next year, and it says both depend on regulatory certainty and durable permits. The company also expects lower distributable cash flow next year, mainly because of higher income taxes.
Our look at South Bow's role in the oil patch explains how the company earns money when crude gets volatile.
While we acknowledge the risk and potential of SOBO as an investment, we believe certain 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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