- NVIDIA is one of the major players already reaping significant financial rewards from AI.
- Palantir has promise, but stock prices will need to stabilise.
Investors have bought into C3.ai’s story, but it is yet to convince Wall Street.
- IonQ has a bright future, but markets have got ahead of themselves.
Exploring the latest developments in the AI sector, Joshua Warner, market analyst for City Index reveals the most notable AI stocks that warrant attention in the current quarter and explains why they should be watched closely.
NVIDIA is the leading provider of chips that are needed for data centres to run powerful AI and machine-learning applications, and it is the poster child of the AI world after earning a $1 trillion valuation this year. Palantir’s software solutions help government and financial firms better understand data, they are now pivoting these systems towards AI models so that they can be continually improved, which has caught the attention of the stock market.
Unlike Palantir, C3.ai has seen the potential in the AI market long before it became a reality this year. They provide over 40 AI software solutions, from tools that can analyse banking transactions to a Customer Relationship Management system. Quantum computer manufacturer IonQ is a small player in the market but has recently quadrupled in value. Their most recent IonQ Forte quantum computer utilises cloud services, carving a niche in an AI-focused industry.
Joshua Warner, market analyst for City Index has said:
“NVIDIA’s shares have been undergoing a correction since peaking at all-time highs in July. We have seen the stock set lower highs since then to suggest we could be seeing a reversal, although the 7-week low hit a few days ago remained above the trough we saw in June.”
“A slip below $401 would mark a new lower-low, making this a key price to watch that could signal a reversal in fortunes. We can see buyers have happily returned to the market when the price has fallen from $401 to $406, having rejected a selloff below here on seven consecutive occasions in the last two months alone. Notably, we could see a potential head and shoulders pattern form if it sinks back toward this level, although it is too early to tell.”
Joshua has said:
“Palantir hopes to pivot its data-driven systems toward enhancing and accelerating existing AI models. Its shares have been undergoing their sharpest correction in over a year since hitting a 19-month high at the start of August, following the unsustainable rally we saw begin in early May.
“We can see that sellers have struggled to push the price below $15 without prompting buyers into action, suggesting this is currently providing support. It has slipped to as low as $14.60, but any move below here could trigger a sharper fall that could initially take it down to the June low of $13.60.”
“The stock will need to regain significant ground if it wants to set new highs and get back on the right path after the 19-month high of $20 proved to be too irresistible for sellers, which appear to have been gradually accepting lower prices throughout this month. The rise in volumes during the recent correction suggests a lot of selling pressure was relieved considering we have seen the price stabilise since volumes have fallen back to more normal levels.”
Joshua has added:
“We saw C3.ai shares break the rally that saw it more than quadruple in value after it hit a 20-month highback in June, having set a lower high at the start of this month.
“We are now waiting to see whether it sets a lower low compared to the trough in June of $31.69. Interestingly, we saw a fierce battle between buyers and sellers last week (16th August) and neither side could gain the upper hand as the stock closed at the same price it opened ($31.69), which is also aligned with the 100-day moving average. This suggests strong demand on both sides at this level, although there have been reduced trading volumes over the past two months. A close below here could trigger a sharper decline, potentially toward $28.50 or possibly toward $25 if it comes under severe pressure.
“On the upside, a return above $37 will reclaim the floor held throughout July. It would then need to break $42.50 and then surpass the last high of $44 to show the bulls are back in charge.”
“IonQ’s shares almost quadrupled in value between the end of March and the 20-month high hit at the start of August. It has since undergone a steep correction, setting lower lows and lower highs to suggest a reversal could be on the cards as markets temper their lofty expectations.
“The stock is currently testing the 50-day moving average for the first time in over three months. It could continue to fall toward a range of $13.50 to $12.50, which was as low as sellers could push the price in July. Below here, we could see it slip back toward the ceiling of $11 that held throughout May and the majority of June.
“The stock would need to set a higher high and move back above $16.50 in order to show that buyers are back in control before the 20-month peak comes back into the crosshairs.”
Joshua Warner, market analyst for City Index, outlines what you should consider when trading AI stocks
“Research Thoroughly: Study a company’s technology, market presence, and financial health before investing, so you know what you’re getting yourself into.
Diversify: Although trading individual AI stocks can provide better returns, it’s recommended that you don’t solely focus on one stock. Trading a basket of AI stocks requires less research and is less risky than trading individual stocks.
Focus on Innovation: Prioritise companies with genuine technological advancements.
Stay Informed: Keep up with AI developments, breakthroughs, and regulatory changes as well as broader economic trends, so you’re better informed.
Chase Hype: Avoid investing solely based on popularity; actual value matters more.
Ignore Ethics: Be cautious of companies with questionable AI practices or reputations.
Put All Your Eggs in One Basket: Avoid concentrating your investments on a single AI stock.
Neglect Due Diligence: Don’t skip researching a company’s fundamentals and competitive landscape.
Overlook Regulations: Be mindful of how regulations can impact AI companies.
Disregard Economic Factors: Consider how broader economic conditions can affect the AI sector.”
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