The latest tech stock bubble has yet to end, but now may be the time to take heed of warnings about a possible upcoming bursting of said bubble, in order to make a fast exit from the top “tech tumble to sell” stocks.
Recently, concerns about a 2024 tech bubble have been rising. In particular, with tech stocks with high exposure to the generative artificial intelligence growth trend.
While timing a market top is difficult, reconsider holding onto every tech stock in your portfolio.
Among the top tech winners, there are many names that are quite vulnerable, despite their recent strength/resilience. Even small shifts in the market or company-specific news can cause these stocks to make big negative moves.
With this, let’s take a look at seven “tech tumble to sell” stocks, to see you should head for the exits with each one, pronto.
Apple (AAPL)
Apple (NASDAQ:AAPL) shares have traded sideways since late last year, zig-zagging between $180 and $200 per share, after a spate of less-than-stellar developments out of the company.
These include further news of soft iPhone demand, Apple’s scrapping of its electric vehicle project, as well as news of Warren Buffett paring down Berkshire Hathaway’s position in AAPL stock.
While not certain, it may be speculation about Apple’s AI plans that has kept the stock from experiencing more turbulent price performance. .
However, what if the ongoing “mania” surrounding AI stocks begins to reverse course? What if Apple fails to impress with subsequent AI-related announcements?
Investors may reconsider the valuation of the “Magnificent Seven” component, which has varying analyst earnings forecasts, and determine if it deserves a high-20s forward valuation.
C3.ai (AI)
With C3.ai (NYSE:AI) shares experiencing a nearly 25% move higher just prior to the writing of this article, even I’ll admit it’s bold to call this AI software play one of the top “tech tumble to sell” stocks.
Yet while AI stock has experienced another big run-up, following the company’s latest earnings release, this latest rally could prove fleeting. Yes, during the preceding quarter, C3.ai did report revenue that beat estimates, and a narrower-than-expected loss. Growth also accelerated last quarter as well.
However, this year-over-year growth acceleration (from 17% to 18%) was not as impressive as the headlines (as well as AI’s post-earnings surge) suggest. hares could cough back these gains as trading conditions normalize.
Concerns about C3.ai by the sell-side may also soon come off the back burner, placing another round of downward pressure on shares.
Advanced Micro Devices (AMD)
If “AI mania” simmers down in the near-future, All AI stocks, including Nvidia, are likely to take a tumble.
However, Advanced Micro Devices (NASDAQ:AMD) could be the high-profile AI chip stock that gets hit the hardest.
Why? This chip designer has clearly made progress playing catchup with Nvidia, the front-runner and early mover in the AI chip horse race. With the launch of the company’s Instinct MI300 AI chip for the data center market, Advanced Micro Devices is well-positioned to capitalize on the boom demand for this hardware.
But as a Seeking Alpha commentator recently argued, forecasted growth from these products is already accounted-for in AMD’s valuation. It may prove difficult for growth to exceed these forecasts.
At the same time, AMD’s gaming and PC chip businesses aren’t likely to improve this year. With this, disappointment, and a big reversal for AMD stock, could lie ahead.
Alphabet (GOOG)
A rich valuation is a major concern with most of the “tech tumble to sell” stocks listed above and below, but I’l admit that Alphabet (NASDAQ:GOOG,NASDAQ:GOOGL) isn’t pricey.
Right now, GOOG stock trades for 20.6 times earnings. This is on the low end among “Magnificent Seven” stocks. However, even as shares in the Google and YouTube parent may look cheap on a screener, it may be a value trap.
At least, based upon one analyst’s assertion that the stock is cheap for a good reason.
As Melius Research’s Ben Retizes recently argued, the market is de-rating GOOG on concerns that the tech giant could soon lose its economic moat.
If Alphabet keeps stumbling with its AI rollout, all while Microsoft and its strategic partner OpenAI gain more ground, these concerns may intensify. In turn, resulting in GOOG sliding to even more discounted forward valuation.
Intel (INTC)
Intel’s (NASDAQ:INTC) efforts to become a formidable AI chip contender have been making the most headlines lately.
However, what may be as material to future performance for the company and for the stock is its efforts to become a major chip foundry, or third-party manufacturer for “fabless” chip designers.
Yet even as Intel has inked some big ticket foundry deals recently, including with Microsoft, analysts are mixed when it comes to when (or even if) Intel’s foundry segment will become as big of a force as industry leader Taiwan Semiconductor.
Even worse, as I discussed last month, just prior to the more promising news, there was some news that indicated Intel’s foundry gamble may not pay off as expected. If more downbeat news emerges, INTC stock could once again come under pressure. As before, INTC trades at a valuation that prices-in a potential comeback as a near-certainty.
Palantir Technologies (PLTR)
Compared to C3.ai, Palantir Technologies (NYSE:PLTR) stands out as a much stronger enterprise AI stock.
While C3.ai may hype up metrics like “customer engagement,” Palantir has impressive commercial sales growth (70% year-over-year, as reported last quarter) that underscores how it is capitalizing on this trend.
Still, despite far stronger AI growth bona fides, PLTR stock isn’t protected from the risk of a post-bubble selloff. If sentiment shifts on artificial intelligence stocks, richly-priced Palantir (trading for 76.9 times earnings) will likely take a hit.
That’s not all. The next round of market turbulence could be because of subsequent interest rate news, rather than anything specific to AI. If rate cuts do not arrive in June (as currently expected), this may have a negative impact on the valuation of growth stocks. With PLTR already very pricey, even a modest de-rating may mean a big correction for shares.
Snowflake (SNOW)
Following its latest quarterly earnings release, Snowflake (NYSE:SNOW) has already experienced a tumble.
Yet even after a 20% post-earnings plunge, a further slide to even lower prices may come next. What makes shares in this cloud data warehousing company at risk of an extended slide?
Although surprise news of a CEO changed played a role in SNOW stock really taking a hit after earnings, the other factor driving the drop (guidance calling for a growth slowdown) may continue to weigh on the minds of investors.
Namely, this news could finally convince the market that Snowflake really isn’t an AI stock, as InvestorPlace’s Dana Blakenhorn argued just ahead of the earnings release.
A shift to such a view could have a cataclysmic impact on SNOW’s valuation. Shares today trade for 238.5 times earnings. At such a steep multiple, shares would remain expensive, even after a 50%, 60%, or even 75% drop in price.
On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
