The ongoing property market protest persists, fueled by the latest jobs report for the upcoming year, which has triggered an upsurge. Following a sudden decline, traders are advised to exercise caution in their dealings.
AI undeniably remains a focal point for many profit-driven investors, with an evident upward trend. Positive financial indicators, coupled with the potential for reduced inflation rates and imminent price adjustments, create an environment that may prove challenging to resist the industry’s momentum.
While there appears to be ample room for continued growth in AI stocks, the short-term trajectory may encounter turbulence. As expected, investors are keen on securing profits and exploring opportunities in more cost-effective AI prospects for their next investment ventures.
Let’s delve into three Artificial Intelligence companies that currently command premium valuations.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ: SMCI) has emerged as one of the standout AI stocks in 2024 thus far. Despite a recent dip of over 20% from its peak, SMCI stock has surged by more than 230% year-to-date (YTD). The current market setback appears to be a minor hiccup when considering the YTD performance.
The introduction of new Nvidia (NASDAQ: NVDA) AI chips, which SMCI is poised to leverage promptly, serves as a promising catalyst in the near term. However, the chart’s unappealing pattern in recent days deters me from pursuing SMCI shares.
With concerns about a potential head-and-shoulders pattern emerging, I opt to observe from the sidelines rather than engage as a buyer. At a lofty 74.4% of the trailing price-to-earnings (P/E) ratio, the shares still appear overvalued.
AMD (AMD)
Similarly, AMD (NASDAQ: AMD) has retraced approximately 20% from its peak in early March. Despite exhibiting weaker performance than NVDA in the past quarter and boasting a higher trailing P/E ratio, caution is warranted regarding AMD, particularly if the Artificial Intelligence sector faces further turmoil.
AMD stands as a formidable player in the AI hardware realm, holding the position of a prominent runner-up. Under the leadership of CEO Lisa Su, AMD possesses the potential to outshine many competitors in the long term. However, near-term risks of a significant pullback loom over the stock.
A more opportune entry point may materialize for prudent AI investors, as AMD diligently strives to maintain or enhance its competitive edge amidst the potential AI market expansion and acceleration. While AMD remains a solid company, the current valuation may be deemed excessive.
Palantir (PLTR)
Palantir (NASDAQ: PLTR) is poised to capitalize on the unfolding AI boom in the years ahead. Despite experiencing a recent vertical spike in its stock price, the data analytics powerhouse faces increased vulnerability to a near-term pullback, particularly as the fervor surrounding Artificial Intelligence subsides temporarily.
For long-term investors, any further weakness in PLTR stock could present an attractive buying opportunity. Despite a more than 13% decline in share value, the stock has yet to reach an appealing price point, signaling a six-day downward trend.
Wall Street analyst Brian White of Monness recently cautioned about the valuation of Palantir stock. Trading at over 23.7 times the price-to-sales ratio, White’s warning seems prescient.
As of the publication date, Joey Frenette did not have any direct or indirect positions in the stocks mentioned in this article. The views expressed herein are solely those of the author, in accordance with the InvestorPlace.com Publishing Guidelines.
Joey Frenette is a seasoned investment journalist specializing in technology and consumer sectors. With contributions to notable platforms such as the Motley Fool Canada, TipRanks, and Barchart, Joey excels in identifying undervalued stocks with long-term growth potential in a dynamic market environment.
