Artificial intelligence (AI) stocks are reeling after a recent plunge triggered by earnings-related declines from industry giants ASML and Taiwan Semiconductor. The segment experienced a broad sell-off, with Super Micro Computer, Arm Holdings, and Nvidia all finishing in the red.
Nvidia: A 19% Downside Prediction
Nvidia has been a trailblazer in the AI boom, capitalizing on the rising demand for its GPUs that underpin essential AI infrastructure like ChatGPT. While the company has witnessed impressive revenue and profit growth, one analyst foresees further declines post the Friday sell-off.
Despite delivering robust results and maintaining dominance in the AI compute space, Nvidia may face intensifying competition from rivals like AMD and Intel, potentially eroding its market share in the next few quarters.
Although Nvidia’s growth rate is expected to decelerate due to tougher comparisons, market consensus projects sustained robust growth. However, a scenario where revenue falters, as suggested by the analyst, could lead to a significant drop in the stock’s value.
Supermicro: A Bearish 65% Outlook
In a similar vein to Nvidia, Supermicro has thrived in the AI realm, with its high-density servers becoming popular for AI applications. Despite soaring revenue, not all analysts share an optimistic view of the company’s future.
Susquehanna rated Supermicro as a sell, citing concerns over the company’s declining gross margin, lack of business model leverage, demanding working capital requirements, and questionable earnings quality. The recent sell-off in Supermicro’s shares could signal larger issues if the company disappoints during its upcoming earnings report.
Investors should brace for continued volatility in Supermicro’s stock, even with high revenue expectations and optimistic guidance.
Before diving into Nvidia stocks, investors should explore alternative options based on proven performance records and future growth potential.
