I recently penned an intriguing piece on Palantir (NASDAQ:PLTR), and my bear case behind this top mega-cap tech stock right now. Rest assured, that’s one of the picks I’m including in this list of top short opportunities in the market, for those who are skeptical of the AI buildout and the amount of spending underway on ushering in a new technological era.
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Palantir (PLTR) trades at over 200-times earnings with valuation concerns raised by Michael Burry.
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Super Micro Computer faces margin compression from rising costs and fierce competition in servers.
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Oracle’s AI deals with companies like OpenAI may not generate the expected cash flows.
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That said, I think the overall tech sector has gotten to a point where investors are really starting to question how much further these companies can run. Valuations are near historic highs, on a number of different metrics – I personally prefer the Buffett indicator (the market capitalization of the entire stock market relative to GDP), but take your pick.
The thing is, a dozen or so stocks are now driving nearly half of the overall earnings growth of the S&P 500. This growth is driven almost entirely by spending tied to the AI trend, with plenty of investors starting to call into question how long this spending can continue, since so much of these dollars are derived from debt issuances from mega-cap tech companies. And given the circular nature of much of this investment, there’s something that just doesn’t pass the sniff test for certain investors.
Here are three AI-related stocks I think could really see a dramatic falloff, if the story around the AI ecosystem truly deteriorates moving forward.
As a leader in liquid cooling technology for servers required to power the AI revolution, Super Micro Computer (NASDAQ:SMCI) stock has been on an incredible ride over the course of the past few years.
Indeed, Super Micro’s stock price has been about as volatile as they come. As a leader in liquid cooling technology, which helps data center customers cool their servers much more efficiently, boosting profitability for those utilizing high amounts of compute, Super Micro’s stock shot from around $4 per share in 2022 to a high of more than $120 per share in 2024. Since then, it’s been a grind lower, with SMCI stock now trading closer to $35 per share, and that’s after a recent spike.
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