If You Invested in These AI Stocks, Booking Profits Now Can Be a Smart Move

Analyzing the current state of AI stocks and why booking profits now could be a smart financial move.

Points

• AI technology is costly and needs to solve complex problems to justify the expense.
• Experts predict a potential 10% market pullback before the upcoming elections.
• Analysts suggest taking profits in AI stocks due to mixed market sentiments.

“AI technology is exceptionally expensive, and to justify those costs, the technology must be able to solve complex problems, which it isn’t designed to do.“ — MIT Professor Daron Acemoglu

In recent market analysis, even optimistic experts like MIT’s Daron Acemoglu have tempered their expectations for transformative AI applications. Morgan Stanley’s chief investment officer, Michael Wilson, predicts a 10% market pullback between now and the upcoming elections, largely due to prevailing uncertainties.

AeroVironment Inc. （NASDAQ: AVAV）

AeroVironment has strategically enhanced its autonomous capabilities by acquiring Intelligent Systems Group in 2021 for its computer vision expertise. Despite geopolitical tensions favoring UAV over manned vehicles and a stock gain of 166% since January 2020, the company reported a 57% decline in earnings per share for fiscal Q4 ‘24. Additionally, a $24 million backlog decrease compared to the previous year raises concerns.

SoundHound AI （NASDAQ: SOUN）

Currently priced at $4.20, SoundHound AI stock remains above its 52-week average of $3.28 per share and well above the 52-week low of $1.49. This performance makes it a solid candidate for profit-locking.

Nvidia （NASDAQ: NVDA）

Nvidia has demonstrated remarkable agility in dominating the AI training market, supported by its comprehensive AI workload software. Priced at $131, NVDA stock is close to its all-time high of $135.58 on June 18th, and nearly double the 52-week average of $67.90 per share. This creates a strong incentive for booking profits, despite Nvidia’s robust fundamentals.

Market Sentiments and Predictions

While the market has seen mixed reactions, with some experts predicting a bearish trend and others maintaining an optimistic outlook, the consensus leans towards caution. A note from Citigroup analysts on July 8th emphasized the need for investors to take profits in high-flying AI stocks, further solidifying this stance.

Have you received sufficient unrealized gains during the AI valuation spree, or do you feel you missed out? Let us know in the comments below.

解説

• Market Volatility: The prediction of a 10% pullback highlights the market’s inherent volatility, particularly in sectors like AI where speculative investment is high.
• Earnings Reports: The decline in AeroVironment’s earnings and backlog, despite revenue growth, signals potential instability, prompting investors to consider profit-locking.
• Stock Performance: Nvidia and SoundHound AI’s high stock prices relative to their 52-week averages suggest a peak, making it a prudent time for investors to secure profits.
• Analyst Recommendations: Citigroup and other financial analysts’ advice to take profits underscores a broader sentiment of caution in the market, particularly for AI stocks.