Nvidia and other AI stocks are plummeting. The Code of Architecture explains why.

Tom Seibel

Tom Seibel, CEO of artificial intelligence company C3.ai.Courtesy C3.ai

  • The hottest AI stocks from earlier in 2023 have fallen in recent weeks.

  • Insider looked at 10 of the top AI stocks and found that many of them are in correction territory.

  • Saying “AI” during an earnings conference call has lost its appeal among some investors.

You can just sayAmnesty InternationalMany times on the earnings call before investors start to restrain themselves.

In recent days, some of the hotter AI shares From 2023 entered revision province. That’s when the shares fell 10% from a recent peak.

The insider took a look 10 of the most important AI stocks Earlier this year I analyzed their performance since peaking. The declines ranged from a loss of 2.3% to a decline of 29%, based on the close of trading on August 9. Five of the ten lost more than 10%.

This could be a short-range blink or a file reaction to higher long-term interest rates, which can lower high-growth technology stocks. Or it could be a sign that investors are tired of the AI ​​hype, and worry that the technology could take years to generate real profits, if any.

In an insightful research note from early June, Morgan Stanley analysts described Amara’s Law, which states that we tend to overestimate the impact of technology in the short term and underestimate the impact in the long term.

They noted that the first week of June saw the largest influx of public technology stocks in history. At $9 billion, that was at least 40% more than the next largest weekly stream.

“If generative AI is to avoid becoming a noise cycle in Amara’s law, these tools will need to show stability over the medium term, a feat that has become more difficult over time,” the researchers write.

In the spring, an executive just had to mention the word “AI” on an earnings conference call and traders would hit the buy button. I suspect that automated trading systems are also calibrated to buy based on such signals.

Big tech companies Amnesty International is mentioned 168 times During analyst calls in the first quarter. AI stocks were flying at that time. In May, Insider highlighted 10 of the biggest gainers YTD in 2023, including C3. aiAnd nvidia and AMD.

Trading trends like this can only last for so long. And it often fizzles out when everyone finally buys and there are no more new buyers. (And yes, using automation and AI to buy up AI stocks is most likely a self-fulfilling prophecy that also can’t last.)

We’re now in second quarter earnings season, and mentioning AI doesn’t seem to have the same impact anymore. Executives have dropped the term by 390 times already this season compared to 92 a year ago, according to a July 28 Bloomberg report. The tech-heavy Nasdaq has fallen more than 3% since then.

There are some other small signs that the AI ​​hype may not live up to the high expectations. Jasper AI, a startup that previously raised $125 million at a valuation of $1.5 billion, cut jobs in July. ChatGPT usage decreasedalthough this may be temporary.

AI subsidiary Nvidia is scheduled to report quarterly results on August 23. And that could set the tone for AI stocks for the remainder of 2023. As of the latest check on August 11th, Nvidia shares are down about 14% from their peak.

Read the original article at Business interested

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