Since this year, artificial intelligence has undoubtedly become the biggest driving force behind the rebound of US stocks, but the latest round of financial reports has also sounded an alarm for investors. The high-risk and high-return pattern of AI concept stocks is becoming more and more evident. The pulling effect of AI transactions on the whole market has shown a decline, and the timing of market style switching may be approaching.

The performance of AI concept stocks in this round of financial reports is both good and bad. On the one hand, companies such as C3.ai have plummeted due to poor performance, and UiPath's CEO's unexpected departure has caused the stock to plummet by 34%.

However, on the other hand, companies such as hp inc. have gained the favor of funds by laying out AI, and their stock prices have doubled. Overall, data shows that since the release of ChatGPT, 86% of AI cited companies' financial reports have exceeded expectations, while other industries are only 78%. Moreover, these companies' stock prices rise an average of 0.3% when their performance exceeds expectations, which is higher than the average decline of 0.3% for traditional companies.

However, if the performance disappoints investors, the average decline of AI concept stocks is as high as 5.3%, much higher than the average decline of 2.5% for traditional companies. This pattern of high returns accompanied by high risks means that if investors want to continue to pursue AI concept stocks, they need to be more cautious.

Undoubtedly, NVIDIA is the key in the entire AI field. Before the May 22 financial report was released, the correlation between the stock and the S&P 500 index was as high as 0.95, and their ups and downs were basically synchronous.

However, there was a differentiation in NVIDIA's stock price after the financial report was released. Julian Emanuel, a strategist at Evercore ISI, pointed out that although the stock rose 20% in the three trading days after the performance, the S&P 500 index remained basically flat during this period, and the correlation showed a significant decline.

This change surprised market analysts, because in the past 30 years, there has never been such a large increase in the top five component stocks by market value in the S&P 500 index, while the index itself has hardly followed the uptrend. Some institutions believe that NVIDIA's stock price and the overall market are beginning to diverge, which may mean that the era of "one stock representing one market" is coming to an end.

In fact, this week, the CBOE volatility index VIX has risen from 11.93 to 14.51, and market noise has increased. Against the backdrop of the fading of the AI concept trading boom, investors may consider shifting their attention to Dow Jones components that were previously neglected by the market.

Since the beginning of this year, the Dow Jones index with a relatively large proportion of traditional companies has risen by only 1.2%, far behind the S&P 500 and the Nasdaq. However, since hitting a new high of 40,000 points on May 17, the Dow has fallen by nearly 5% and is currently experiencing its largest oversold level since September 2022.

Editor/ruby