The run-up in various suppliers to the artificial intelligence hardware sector is showing signs of strain.
Seagate (STX) peaked at $264.83 on Oct. 2. Shares fell by 4.88% on Monday and closed at $254.74. The storage supplier trades at a premium of a forward price-to-earnings ratio of 21 times. Similarly, Western Digital (WDC) and Sandisk (SNDK) are also richly valued.
“AI slop” is video and image content that adds no entertainment value to its viewer. AI subscribers might use AI to create endless content. However, they may run out of ideas or lose interest very quickly. That reduces the market size potential for storage.
AppLovin (APP) did not participate in Monday’s strong rally. Shares peaked at $745.61 and closed at around $566. RBC Capital rated the stock with a bullish view and a $700 price target. However, the valuations suggest a correction is underway.
Oracle (ORCL) continued to pull back again. The stock potentially formed a “triple top” at between $310 and $345.72. ORCL stock trades at a forward P/E of nearly 43 times. Investors might consider accumulating its peers. For example, ServiceNow (NOW) is attractive, given its leading edge integration of AI tools with its product. Zscaler (ZS) and CrowdStrike (CRWD) are also strong growth firms to consider.
