As the AI bubble looms, fears grow that some overvalued stocks could vanish from the market. Straight out of Silicon Valley, here’s a closer look at the companies at risk
These stocks will be swept away by the AI bubble. Warnings are emerging from multiple sources: directly from Silicon Valley, the global hub of technology and innovation, and also from the European Central Bank.
In its latest semi-annual study, the "Financial Stability Review", the ECB highlights the bubble risk surrounding stocks linked to artificial intelligence.
Some analysts further caution that inflation, driven by Trump’s new measures, could trigger an increase in interest rates, placing downward pressure on valuations and potentially bursting the stock market bubble by 2026—reminiscent of the DotCom bubble of the mid-1990s.
Before diving into which stocks may be swept away by the AI bubble, it’s worth considering the contrasting perspective from JP Morgan analysts. They argue that the bubble risk is overstated.
According to them, the Magnificent 7—valued at 29 times projected earnings compared to 19 times for the rest of the S&P 500—is trading at a premium that could narrow as the artificial intelligence sector matures.
If AI delivers on its promises, this gap could shrink as spin-offs drive broader market growth.
1) Super Micro Computer
The case of Super Micro Computer highlights the volatility and risks associated with AI-driven stocks.
After a staggering 300% surge in early 2024, the stock plunged approximately 70%, reflecting significant challenges, including accounting issues that have cast doubt on the company’s stability.
Super Micro Computer has emerged as a leader in generative AI, fueled by surging demand for its servers.
While revenues more than doubled in fiscal 2024, preliminary figures for Q1 of fiscal 2025 (ending September 30, 2024) revealed net sales of $5.9 billion to $6.0 billion—slightly below expectations—and GAAP and non-GAAP gross margins around 13%.
Despite trading at an attractive multiple of approximately 10 times consensus FY’25 earnings, internal governance challenges and delisting risk continue to pose threats to the company’s long-term profitability and shareholder value.
2) Cirrus Logic
Cirrus Logic, a chipmaker primarily known for supplying components to Apple, saw its strong performance in the first eight months of 2024 reverse sharply, with shares declining over 25% from late-August highs. This drop followed the company’s fiscal Q2 2025 earnings report.
Cirrus posted quarterly revenue of $542 million, a 13% year-over-year increase and a 45% sequential rise.
However, it revised its guidance downward, projecting Q3 revenue between $480 million and $540 million—an estimated 18% drop.
The company’s heavy reliance on Apple, which accounts for 90% of its revenue, poses an additional risk.
Such dependency on a single customer leaves Cirrus vulnerable to fluctuations in demand or strategic changes by Apple, which could weigh on the company’s performance, particularly in the short term.
| DISCLAIMER The information and analyses provided in this article are for informational purposes only and should not be relied upon as the sole basis for making investment decisions. Readers are encouraged to make independent decisions based on their individual risk tolerance and investment horizons. This article does not constitute an offer or solicitation for investment. |
Original article published on Money.it Italy 2024-12-01 18:19:00. Original title: Queste azioni saranno spazzate via dalla bolla sull’AI
