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Artificial Intelligence Tech Stocks Stall After Rapid Rally
The rapid rally in tech stocks benefiting from artificial intelligence has stalled as Nvidia Corp. slipped after surging over 30% in three days and a disappointing outlook from C3.ai Inc. sparked a selloff in its shares.
C3.ai Falls 20% on Disappointing Sales Outlook
AI software firm C3.ai fell 20% in US premarket trading on Thursday, extending yesterday’s drop of 9% on disappointing sales outlook, paring its gain for the year to just under 260%.
Nvidia Slides 5.7% After Reaching $1 Trillion Market Cap
Nvidia declined 5.7% Wednesday, the most since Jan. 30, after the chipmaker briefly reached a $1 trillion market cap earlier this week.
Lofty Valuations Raise Caution in AI Industry
Wall Street has been obsessed with everything AI this year, with Nvidia’s blowout revenue forecast adding fuel to the frenzied rally. But lofty valuations are a reason for caution in the still-nascent industry.
Ripple Effect in Asia
Cracks appeared in Asia as well, with three Nvidia suppliers cooling after big gains in May. Taiwan Semiconductor Manufacturing Co. fell for a third-straight day while Tokyo-listed Advantest Corp. and South Korea’s SK Hynix Inc. are little changed over the past two sessions.
Is Nvidia Too Pricey?
Nvidia is expected to be the prime beneficiary of the wave of demand for generative AI like ChatGPT. That’s left some wondering if the world’s most valuable chipmaker is now too pricey.
The AI Faithful Remain Unshaken
The AI faithful are unlikely to be shaken by a few down days, however. Nvidia CEO Jensen Huang says companies that refuse to take full advantage of the opportunities provided by AI “will perish”.
Conclusion
The rapid rally in AI tech stocks has been stalling as Nvidia and C3.ai prices decrease, highlighting the dangers of overvaluation. Though this may be a cause for concern in the nascent industry, experts say that the AI faithful remain strong, with bullish bets still being placed on Nvidia, the world’s most valuable chipmaker, in the options market. Companies using AI technologies stand to reap great rewards, and those who refuse to adopt these technologies risk being left behind.
FAQ
What is causing the stall in AI tech stocks?
The rapid rally in AI tech stocks has stalled as Nvidia and C3.ai prices decrease. Lofty valuations are a reason for caution in the still-nascent industry.
Why did C3.ai’s stock price decrease?
AI software firm C3.ai fell 20% in US premarket trading on Thursday, extending yesterday’s drop of 9% on disappointing sales outlook, paring its gain for the year to just under 260%.
Why did Nvidia’s stock price decrease?
Nvidia declined 5.7% Wednesday, the most since Jan. 30, after the chipmaker briefly reached a $1 trillion market cap earlier this week, causing some to wonder if the company was overvalued.
What is the outlook for AI tech stocks?
The AI faithful remain strong, and companies using AI technologies stand to reap great rewards. Despite the stall in AI tech stocks, those who refuse to adopt these technologies risk being left behind.
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