Expect Markets to Get Skeptical on AI Plays this Year

After leading the market for most of last year, big-cap tech plays investing heavily in artificial intelligence (AI) may take a backseat. That could lead some to think that there was a mini-bubble in AI that is now deflating.

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  • However, that’s not how bubbles work. AI is still in its early stages. And it will take years for the trend to play out. That’s why the potential for a bubble exists down the line. For 2024, however, AI stocks may slow.

    That doesn’t mean the story is dead. Just that investors will need to pick and choose carefully, and use pullbacks to their advantage. It’s also why analysts are starting to downgrade some AI plays, such as Palantir Technologies (PLTR).

    The data analytics company rose over 150 percent in the past year. This year’s returns will likely be far lower. But it could still be a market winner given its dominance in data analytics software.

    Action to take: Palantir shares have come well off their recent highs. It’s a reasonable long-term growth play for the rollout of AI. Investors should look to accumulate shares under $16.50. Currently, Palantir does not pay a dividend.

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  • For traders, shares are nearing oversold levels, and a rebound in the coming weeks looks likely. The March $17 calls, last going for about $1.35, could see mid-double-digit returns on a strong bounce higher in the coming weeks.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any companies mentioned in this article.