Source: Wall Street See News Author: Bu Shuqing.
The days of raising funds simply by shouting a few AI buzzwords are gone - in the future, companies will need to speak with solid performance.
Most of this year's highly sought after AI concept stocks have started to decline. Faced with increasingly cautious investors, listed companies may find it difficult to raise money under the banner of AI.
60% of the stocks in the S&P 500 index have risen this year, but more than half of the stocks in Citigroup's AI stock index, AI Winners Basket (based on last year's most popular companies among the bank's clients), have seen their prices drop this year, and three-quarters of them have risen in 2023.
Overseas AI-related funds have also encountered similar embarrassing experiences.
In BlackRock's robotics and AI ETF, Invesco's AI and next-generation software fund, and First Trust and Nasdaq's AI and robotics ETFs, more than half of the individual stocks have fallen this year.
Stuart Kaiser, head of Citigroup's U.S. stock trading strategy, said that even though AI is still a hot topic of interest and discussion, it is not enough to attract investors or market attention just by mentioning AI frequently.
15 times mentioning AI is not enough.
He believes that companies need to demonstrate how they have benefited from AI and how they are using it to drive business growth or improve efficiency through actual performance and evidence.
The future of companies is to speak with concrete evidence.
As the recognized largest 'shovel seller' of AI, NVIDIA's stock price has skyrocketed by 180% this year and surpassed Apple and Microsoft this week to become the world's most valuable listed company.
Microsoft, which bet heavily on ChatGPT, saw its stock price almost double from 2023.
Due to strong demand for AI, NVIDIA's total revenue in the first quarter surged by 260% and profit skyrocketed sixfold. Huang Renxun said that the strongest chip Blackwell will bring in a lot of income this year and new products will be launched every year in the future. Microsoft's first-quarter financial report also exceeded expectations across the board, with Azure cloud revenue accelerating by 31%.
Mona Mahajan, senior investment strategist at Edward Jones, said:
Investors are paying more attention to the revenue stories behind the name 'AI.' The difference with NVIDIA is that they have basically achieved their goals and demonstrated real data.
By contrast, technology stocks like Salesforce, Snowflake, Intel, and Adobe, which rose sharply in 2023, have fallen sharply. These companies' stock market capitalizations are much smaller than those of giants like NVIDIA and Microsoft, but they are still seen as large-cap stocks.
After disappointing first-quarter results last month, Salesforce suffered its worst single-day drop in 20 years.
Kaiser said:
In the technology sector, investors have demanding requirements during earnings season, and companies that do not meet those requirements will be hit hard.
How much of an AI bubble is there?
Although some see this change as a sign of rational regression, Rob Arnott, chairman of asset management firm Research Affiliates, says that AI stocks still exhibit "typical" bubble features.
One thing about a typical bubble is that you will see smaller players gradually disappear before larger players begin to suffer.
Arnott emphasizes his belief in the long-term impact of AI, but states that "many benefits will gradually emerge and the market is pricing in immediacy."
In addition, Ken Griffin, CEO of Castle Investment, previously stated in a media interview that many companies claim to embrace AI technology comprehensively, but in reality have not truly involved it. He cautions investors not to be swayed by valuations.
Editor/Lambor