The S&P 500 (SPY) and Nasdaq’s (QQQ) weak performance last week will worry investors holding AI-related stocks. Valuations are wildly stretched for AMD (AMD), Nvidia (NVDA), and Super Computer Micro (SMCI). Markets justify their rise on expectations that growth will accelerate this year.
Assuming the market does not suddenly panic about valuations, all three stocks should fall only slightly from here.
AMD has the most bearish momentum today. The stock peaked at over $220 before falling heavily intraday on March 8. Since then, the stock fell sharply, closing at $170.42. Investors prefer to hold Nvidia, whose leadership in the desktop gaming GPU and server AI markets is more appealing.
Nvidia has some technical risks on the chart, which indicates a “double top” at $950. NVDA stock closed at $880.08.
SMCI’s downtrend is not a concern yet. Trading volume is falling as shares fall. Still, JP Morgan’s upgrade on March 25 is late, after the stock is already up. The firm cites market leadership, market share growth, custom build demand, and the strong AI server market as reasons to buy SMCI stock.
Your Takeaway
Be wary of companies citing AI in their conference call to try to attract investors. AI investments must increase operating efficiency and improve service quality. Otherwise, this is a fad that does not pay off for those investing in AI solutions.
