Key Points
This company is adding to the value of its offerings by infusing them with artificial intelligence.
After a difficult period, the company's growth looks set to take off again in 2026.
Investors often talk about growth stocks in terms of their cyclical growth (tied to the economy) and secular growth (benefiting from a structural and fundamental change in an industry). The distinction is beneficial to understand when looking at machine vision company Cognex (NASDAQ: CGNX).
Cognex has a big future
It's no secret that the increasing adoption of technologies like automation and machine vision is the key to modern manufacturing, particularly in reshoring it from countries with lower labor costs. In addition, machine vision's ability to perform repetitive tasks in assembly lines and logistics -- guiding, monitoring, inspecting, and controlling processes more effectively than the human eye -- is a significant plus.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »
Also, consider the potential of deep learning through artificial intelligence (AI). For example, Cognex's software can learn from "right " and "wrong" examples given to it, enabling the hardware to identify anomalies in production. As such, Cognex is also a way to play the AI evolution, as it will significantly enhance the value-add of its solutions.
Cognex and interest rates
All of the above is an example of secular growth. However, like almost all companies, Cognex also relies on cyclical growth. Furthermore, its exposure to capital spending in interest-rate-sensitive areas, like automotives (notably electric vehicle batteries) and consumer electronics (Apple has been a significant customer in the past), leaves it exposed to the ups and downs of the economy.
When the economy is booming, auto and electronics companies are willing to make expansionary capital spending decisions, and when it's weak, cutting capital spending is often the first thing companies look to do.
Image source: Getty Images.
Unfortunately, the relatively high interest rates have hit Cognex's overall growth prospects, even as it grows its AI solutions by embedding more AI/deep learning into its solutions. If and when interest rates do move lower, there's likely to be some spending due from automakers and electronics companies as end demand at least stabilizes, and they need to invest in new product development. That will benefit Cognex. All told, the combination of secular and cyclical growth makes Cognex an excellent stock to buy ahead of a rate cut.
Should you invest $1,000 in Cognex right now?
Before you buy stock in Cognex, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Cognex wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $635,544!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,099,758!*
Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
See the 10 stocks »
*Stock Advisor returns as of August 4, 2025
Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Cognex. The Motley Fool has a disclosure policy.