When bears took over stock markets for most of 2022, the euphoria in obesity drugs and the artificial intelligence sector gripped 2023 markets. This combination rose further still when speculators grew increasingly convinced that interest rates would fall by at least 1.5% in 2024.
On the first trading day, doubt reappeared unexpectedly on rate cuts. This uncertainty could become a catalyst in popping the obesity and AI bubble. Fundamental issues are starting to appear in both sectors.
The Food and Drug Administration is evaluating reports of GLP-1 (obesity) drugs. They are looking at the causation between the drug and side effects including hair loss, aspiration issues, and suicidal thoughts. Drugs that the FDA would review include Ozempic, Adlyxin, and Soliqua.
Watch out for selling pressure in Eli Lilly (LLY), Novo Nordisk (NVO), Sanofi (SNY), and AstraZeneca (AZN).
In the AI space, analysts expressed caution for Palantir (PLTR). Jefferies called AI for Palantir’s business overhyped. The firm set a $13 price target.
Bears should not get too negative on Nvidia. Bank of America believes the firm could generate around $100 billion in free cash flow over two years. Setting a $700 price target, the FCF growth would increase shareholder returns through acquisitions and stock buybacks.
Watch stock valuations from here. If prices keep rising while earnings slow, the two sectors could underperform.
