AI Bubble Watch: Nasdaq Rally on Pause - InvestingChannel

AI Bubble Watch: Nasdaq Rally on Pause

Traders may start to worry that the perfectly symmetrical V-shaped recovery is over.
On Tuesday, Nasdaq (QQQ) fell by 0.21%. Nvidia (NVDA) led the decline by falling 2.12%. Intel (INTC) fell by ore, down by 2.46%. Advanced Micro Devices (AMD), Texas Instruments (TXN), and Microsoft (MSFT) rose slightly.

Investors are not likely to rotate away from artificial intelligence suppliers. Buyers took advantage of Super Micro (SMCI) falling to $500 earlier this month. Investors snapped up the stock when it traded at more than 50% below its 52-week high.

The direction for AI-related stocks is not clear. To continue its rebound, the market needs a robust economy and a strong labor market. Unfortunately, the persistently high interest rates failed to slow consumer spending levels. This pressures inflation rates and keeps interest rates at current levels. Corporations need to adjust to higher labor costs, rising supply, and falling demand to sustain profit margins.

Companies like Best Buy (BBY) and Walmart (WMT) managed their costs well. Conversely, automotive firms will struggle. They bet on customers willing to spend six figures on a luxurious truck or SUV. Still, they will have trouble selling affordable vehicles.

For now, corporations continue to build AI in their business model. This is good news for chip suppliers like Nvidia and software firms like Microsoft.

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