The artificial intelligence frenzy has propelled Nvidia to become the world’s most valuable company, but many other stocks hyped as AI winners have seen their share prices fall this year as investors become more selective.
Nvidia’s rise contrasts with broader AI stock declines: While Nvidia’s stock has more than doubled in value this year, over half of the companies in various AI-focused stock indices and ETFs have seen their share prices decline in 2023, suggesting that investors are looking more closely at companies’ actual AI capabilities and earnings potential.
Earnings and fundamentals matter more now: Analysts note that companies now need to demonstrate real evidence of AI-driven growth and profitability, not just mention AI frequently, to see their stocks rise. Firms that disappoint on earnings are getting punished.
Mixed views on the AI-linked stock rally: Some see the market starting to differentiate between real AI winners and losers as a sign of rationality returning. However, others still view the AI rally as a potential bubble, noting that the benefits of the technology will accrue gradually while stocks are priced for immediate impact.