AI Stocks on a Wild Ride: Billionaires Easing the Gas Pedal
In a realm of surging artificial intelligence (AI) stocks, some notable investors are hitting the brakes, sensing an overvalued market. The recent rallies of semiconductor giant Nvidia and other AI players have ignited concerns about a surge too far.
Nvidia: A Chipmaker with Hype
Billionaire investor Stanley Druckenmiller, known for his savvy market moves, has reduced his Nvidia stake. In an interview with CNBC’s “Squawk Box,” he expressed caution about the stock’s short-term overexcitement. Similarly, Brad Gerstner of Altimeter has eased his position in Nvidia, signaling a potential cooling in investor sentiment.
Screening for Overextended AI Stocks
To identify AI stocks that may have overshot their value, LA News Center has conducted an analysis. We screened AI-related companies with high forward price-to-earnings (P/E) ratios and significant gains since the bull market began in late 2023.
Winners on the List
The screening revealed several semiconductor stocks that fit the criteria, reflecting the sector’s surge in the AI boom:
Advanced Micro Devices (AMD): AMD, Nvidia’s rival in chipmaking, has seen its shares soar by over 50% since October 2023. Its P/E ratio currently stands at 44 times, a premium of 26% to its historical average.
Micron Technology (MU): A leading memory chipmaker, Micron Technology’s stock has skyrocketed to a P/E of 149 times. This represents a staggering 700% premium over its five-year average of merely 19 times.
Other notable mentions include Arm Holdings and Broadcom. Arm shares have doubled since October 2023, trading at a 43% premium to their historical P/E. Broadcom has rallied by around 58% during the same period.
Super Micro Computer: The King of Growth
Of all the stocks analyzed, Super Micro Computer (SMCI) has experienced the most dramatic growth. Its shares have jumped by an astonishing 203% since October, as investors flock to its AI server offerings. Over the past year, SMCI’s stock has surged by 493%, resulting in a staggering 185% premium to its five-year average P/E ratio.
Other Notable Names
The screening also identified companies such as Arista Networks, Applied Materials, and KLA Corporation as potential overvalued AI plays.
Caution Amidst the Excitement
While the AI sector offers immense promise, investors need to be cautious of stocks that may have outpaced their fundamentals. Profit-taking by savvy investors, such as Druckenmiller and Gerstner, serves as a timely reminder to manage risk and seek out more reasonably valued opportunities.
Data sourced from: cnbc.com
