3 Artificial Intelligence Down Less Than 50% From Their 52-Week High. Can They Buy Now?
It’s hard not to get caught up in the conversation about artificial intelligence (AI) when analysts are showing so much growth. Grand View Research projects that by 2030, the AI ​​market will be worth $1.8 a trillionup from about $279 billion this year. With such growth, investors who don’t own AI stocks may feel like they’re missing out.
But buying shares of chipmaker Nvidia or some AI stocks that have already generated huge returns may not be all that attractive given their high valuations. Buying at these high levels can limit the gains you make in the stock both in the short and long term.
Another option is to consider AI stocks that have been underperforming recently. You may be taking on more risk but you can reap some powerful rewards if they end up multiplying. Snowflake (NYSE: IKHIKA), The Super Micro Computer (NASDAQ: SMCI)again SoundHound AI (NASDAQ: SOUN) all AI stocks are down more than 50% from their 52-week highs. Below, I’ve ranked them according to how likely they are to change things.
1. Super Micro Computer
Super Micro Computer, also known as Supermicro, was one of the hottest AI stocks to own earlier this year. But it has struggled for weeks after the release of its 2024 Q4 earnings and a report from a short seller known to Hindenburg Research questioning the company’s accounting practices. Although such reports may be biased and contain unsubstantiated allegations, investors have nonetheless been bearish on the stock following these changes.
Today, Supermicro stock is trading around $450 per share, more than 60% below its 52-week high of $1,229. The company’s business has been booming as it provides clients with servers and IT infrastructure to help them grow their operations, especially as they expand their AI products and services.
For the fiscal year ended June 30, Supermicro’s sales reached $14.9 billion, up 110% year over year. Profit also jumped from $640 million to $1.2 billion. However, the latest earnings report spooked investors as its gross margin has been shrinking, which could seriously hurt its earnings outlook if that trend continues.
Supermicro made a surprise purchase because Hindenburg’s short report and recent quarterly results managed to overshadow what is still impressive growth. There are certainly risks from its shrinking margins, but it could be an AI stock to take advantage of right now.
2. Snowflake
Data storage company Snowflake has struggled in 2024 as it posted poor results, and investors have been reeling since the company’s CEO unexpectedly retired earlier this year. It also didn’t help that the company was involved in a major data breach, which affected several large customers. Down more than 40% year to date, Snowflake’s decline has continued since shares peaked in late 2021.
In order for Snowflake to turn things around, they need to put up better numbers, especially at the end. Although the company is growing its business, that is not very encouraging when its losses have been high. In the first two quarters of this year, Snowflake’s operating loss grew 26% year over year to $703.9 million, roughly matching its top line growth of 31% over the same period. And to make matters worse, management has reduced its full-year margin guidance for fiscal 2025.
Until Snowflake can show that there is future profit potential, I would avoid the stock.
3. SoundHound AI
Shares of SoundHound AI took off earlier this year as investors learned that Nvidia had invested in the company. Although the stock has fallen in recent months, it is still up more than 130% year to date, even after falling 52% from a high of $10.25.
SoundHound’s voice AI technology can help restaurants take orders and follow voice commands. While the business is growing, competition in this space is fierce, and its numbers may not be high enough to suggest that its market share is that big.
In the second quarter, the company’s revenue rose 54% to $13.5 million, but its net loss rose 60% to $37.3 million.
There’s still a bit of uncertainty surrounding the SoundHound AI, and it’s arguably the riskiest pick on this list given its high rating. I would have avoided it despite the sale.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Nvidia and Snowflake. The Motley Fool has a policy of disclosure.
3 Artificial Intelligence Down Less Than 50% From Their 52-Week High. Can They Buy Now? was first published by The Motley Fool
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