The increased volatile trading in semiconductor stocks is a bearish sign for the artificial intelligence market theme. Intel (INTC), which is not a competitive supplier to the AI market, plunged by 26.06% after posting weak quarterly results, cutting 15% (or 15,000) staff, and suspending its dividend.
Hedge fund Elliot Management went further by calling the AI theme overhyping Nvidia (NVDA) stock. The firm questions the selling momentum for Nvidia’s GPUs. Elliot does not believe the huge selling volume is sustainable, despite Meta Platforms (META), Alphabet (GOOG), and Tesla’s (TSLA) xAI buying them at thousands at a time.
Elliot management thinks that AI applications are not ready for the mainstream market. The power draw rises as users increase their AI queries in a chatbot. The firm did not mention AI hallucinations. This phenomenon results in inaccurate and even incorrect responses, the more aggressive the AI compiles an answer.
Investors should watch out for downside selling pressure in Intel, Nvidia, AMD, ASML, Qualcomm (QCOM), Broadcom (AVGO), and Alphabet. Most notably, Elliiot Management is avoiding the magnificent 7. This includes Amazon and Tesla.
Your Takeaway
The AI hype is similar to the internet dot-com bubble of the 1990s. It started with a fad, fell into a euphoria phase, and ended with a pop of panic selling.
