Raymond James Investment Management chief market strategist Matt Orton joins Brad Smith and Seana Smith on Morning Brief’s Strategy Session to discuss how to play artificial intelligence (AI) stocks beyond the Big Tech names.

As mega-cap tech stocks gain and September's interest rate cut sends the market higher (^DJI, ^IXIC, ^GSPC), Orton says he still likes the Big Tech sector.

“There's plenty of reasons that clients still want to own the mega-cap technology names. Especially the high-quality ones that are generating $50 [billion], $60 [billion], $70 billion of free cash flow per year. But what I've been encouraging clients really for the past three months or so is that we have an opportunity to build better balance in our portfolios.”

“Now that we're finally starting to get rate cuts, I think we're starting to see more of a clear path to get to that soft landing. That should support a lot more cyclical parts of the market, too, that maybe haven't done as well as technology," he says about the Federal Reserve's rate cut move.

Orton explains that there are stocks and sectors he sees benefiting from the AI boom without being directly tied to developing the tech the way Big Tech companies are, what he calls the “AI 2.0 bucket."

“Take the industrial space, for example. You look at electric equipment companies. We know we need more power in this country. We also know we need to cool data centers down as you continue to get more of them. So companies that are producing cooling solutions and liquid cooling, those names look very attractive.”

Orton says he tells clients to “play offense with defense” as while there are concerns around geopolitical conflict, defense companies are benefiting from governments' increased spending. “You're finally seeing that translate into increased earnings and free cash flow across a number of defense companies.”

“There's an opportunity in that part of the market and in totally non-related to artificial intelligence,” that “aren't just tech or semiconductors,” Orton tells Yahoo Finance.

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This post was written by Naomi Buchanan.