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Here are the takeaways from today’s Morning Brief. sign up Every morning you will receive the following message in your inbox:
Imagine you are self-contained in a bubble.
The bubble expands or deflates every second depending on the conditions outside the bubble.
This is exactly the environment we may find ourselves in as investors place hot AI trading under a wider microscope. Not every day is inflationary because of a bubble.
And make no mistake, investors should take a close look at all of the AI stocks based on this week’s several stabs at the bubble, which deserve more attention than they’re getting.
“Obviously we live in a highly hyped environment and at some point we have to make this more reasonable,” said Antonio Neri, CEO of Hewlett Packard Enterprise (HPE). (video above) told me on Yahoo Finance Live.
Neri was hours away from surprising some investors with a 14% year-over-year decline in quarterly sales. (Thank you for still participating and answering the tough questions!). HPE lowered its full-year revenue outlook despite having billions of dollars in AI-related backlogs.
So what does that give?
Neri said companies are having a hard time implementing the AI technology they have purchased. Issues range from the need to find a new power source to having the physical space to house the equipment.
Another problem is the persistent shortage of high-performance AI chips. There are no tips and they cannot fulfill your order. A simple equation.
HPE stock fell 14% in after-hours trading Thursday following the earnings release. The commentary and quarters resembled a Jean-Claude Van Damme gut punch.
But the stock rebounded after Neri’s bullish comments to me about the outlook for margins and HPE’s acquisition of Juniper (JNPR) expected to close by late this year or early 2025.
Still, HPE has given investors another reason to be concerned about the AI hype.
Similarly, PC maker HP Inc (HPQ) was hesitant to incorporate strong future demand for AI PCs into its current full-year outlook. Learn more in our chat with HP CEO Enrique Lores.
Meanwhile, SoundHound AI (SOUN), a popular stock on the Yahoo Finance Trending Ticker page, fell nearly 20% on Friday. The company’s revenue fell short of expectations, and oh yeah, it lost $88 million on a net basis last year.
“Mag-7 is measured to be a bit frothy, but not in a full bubble.Valuations are a bit expensive given current and expected earnings, and sentiment is bullish, but not overly “There doesn’t seem to be any bullishness on the market, and we don’t see any over-leverage or over-leveraging. “There’s a rush of new, naive buyers,” said billionaire hedge fund manager Ray Dalio. he warned in a new blog post on LinkedIn.
“Having said that, it is still conceivable that these names could undergo significant revisions if the generative AI fails to meet the built-in impacts,” he continued.
There were several moments this week when the AI bubble inflated.
Dell stock soared 26% as investors forgot that the company makes PCs and focused on AI’s bullish comments on the company’s earnings call.
AI hopes have pushed AMD’s (AMD) market capitalization past the $300 billion mark for the first time, capping another victory for CEO Lisa Su.
And C3.ai (AI) stock soared 24% on Thursday after announcing earnings the day before. Tech OG and C3.ai CEO Tom Siebel told Seana Smith, Brad Smith, and everyone on Yahoo Finance Live that we are in the early stages of the AI cycle.
We saw that in C3.ai’s government sales in the fourth quarter.
In any case, the ups and downs of life in the AI bubble will continue for another week.
Brian Sozzi I’m the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @BrianSozzi And even more linkedin. Have a tip about a deal, merger, activist situation, or more? Email brian.sozzi@yahoofinance.com.
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