Artificial intelligence continues to be amajordriver of the stock market. Expectations are that AI will eventually touch every aspect of our lives, opening up ahugenew area of the tech sector. Bloomberg Intelligence estimates that AI will becomea $1.3 trillion marketby 2032. Many forecasts put the market even higher in less than 10 years. The explosive growth has madeAI stocksred-hot and in demand among investors.
But caution is needed. Not every company and stock associated with AI is worth an investment of capital. Already, winners and losers are emerging in the AI space. Companiessuch asMicrosoft(NASDAQ:MSFT) are pulling ahead while others likeC3.ai(NYSE:AI) arebeing leftin the dust. The trick for investors is to separate the proverbial wheat from the chafewhen it comes toAI stocks and the industry’s future.
Here is a stock market crash warning: Don’t get caught holding these three AI stocks.
Software companyAdobe(NASDAQ:ADBE) is alreadya badstockto own. In a market crash it could bedownright awful. ADBE stock plunged 12% after the company’s latest financial resultswere issuedin March. While the company behind popular products such as Photoshop and Illustrator managed tobeat expectationson the top and bottom lines, its forward guidance disappointed analysts and investors.Through four months of the year,Adobe’s stock is down by 16%.
Adobe is doing its best to add AI technologies to its suite of software products. It recently unveiled an AI assistant for its Reader and Acrobat apps.However, somewhat ironically, it appears that AIis posingan existential threat to the company.ADBE stock started to sell off last year when privately heldOpenAI introduced “Sora,”an AI platform that can generate videos based on written descriptions. Some analysts feel that it is only a matter of time before AI replaces Adobe’s suite of creative software products.
Adobe is nowlooking to partner with OpenAIand add that company’s technology to its software.Time will tell ifsuccess is achieved.In the meantime, ADBE stock continues to slide lower.
IBM (IBM)
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International Business Machines Corp.(NYSE:IBM) is also doing its best to capitalize on the AI craze,recentlyannouncingplans to spend $1 billionexpanding its semiconductor packagingand testing plant up north in Canada.During this year’s first quarter, IBM provided its army of 160,000 consultants with AI assistants to help boost their productivity. Yet despite its efforts, the AI rollout can’t mask the many problems at the legacy technology company.
IBM’s stock recently fell 10% after it announcedmixed financial resultsand announced that it is acquiring cloud software makerHashiCorp(NASDAQ:HCP) for $6.4 billion in a deal that’s expected to boost its cloud-computing services.Analystsseemskeptical of the deal and didn’t careforIBM’s earnings.While the technology company beat on its Q1 earnings, it missed on revenue. It was IBM’s third revenue miss in the last five quarters. The stock of IBM is down 13% in the past month, lowering its year-to-date gain to only 2%.
Intel (INTC)
In early April,Intel(NASDAQ:INTC) unveiled a new AI microchip called the “Gaudi 3” that the company says can be used to train and deploy big AI models and chatbots. Intel claims that its new AI chip is over twice as power-efficient and one-and-a-half times faster thanNvidia’s(NASDAQ:NVDA) competing H100 microchipthatiswidely usedwith AI. Intel saidthat thenew Gaudi 3 chips would be available to customers in the third quarter of this year, though it didn’t provide a price for the new chip.
Takingshare from Nvidiain the AI chip marketwill be difficult for Intel. Nvidia currently holds an estimated 75% to 80% share of the AI chip market with its graphics processors, known as GPUs,thathave become the standard for running AI applications and models.In March of this year, Nvidia revealed new B100 and B200 GPUs, which are the successors to its smash hit H100 chip and are even more powerful. Intel is also struggling with its transformation into a microchip and semiconductor foundry business.
Onthe date of publication, Joel Bagloleheld long positions in NVDA and MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
The 1929 crash was caused by many factors, such as a boom after World War I, overproduction in key industries, increased use of margin for purchasing stocks, lack of global buyers around the world due to the war, and so on.
When a stock tumbles and an investor loses money, the money doesn't get redistributed to someone else. Drops in account value reflect dwindling investor interest and a change in investor perception of the stock.
A stock market crash can be scary. Perhaps the worst thing an investor can do is to panic and sell at the bottom. Instead, assuming you have properly diversified, trust in your long-term strategy, make some adjustments and wait for the inevitable turnaround in the market.
What are the best investments during a stock market? Some investments that may provide positive returns during a stock market crash can include safe-havens such as gold and the US dollar. Companies related to consumer staples also tend to rise in value, such as utility, food or pharmaceutical stocks.
Not everyone, however, lost money during the worst economic downturn in American history. Business titans such as William Boeing and Walter Chrysler actually grew their fortunes during the Great Depression.
The best recession stocks include consumer staples, utilities and healthcare companies, all of which produce goods and services that consumers can't do without, no matter how bad the economy gets.
A drop in price to zero means the investor loses his or her entire investment: a return of -100%. To summarize, yes, a stock can lose its entire value. However, depending on the investor's position, the drop to worthlessness can be either good (short positions) or bad (long positions).
No, a stock market crash only indicates a fall in prices where a majority of investors face losses but do not completely lose all the money. The money is lost only when the positions are sold during or after the crash.
Your claimed capital losses will come off your taxable income, reducing your tax bill. Your maximum net capital loss in any tax year is $3,000. The IRS limits your net loss to $3,000 (for individuals and married filing jointly) or $1,500 (for married filing separately).
Stock market investors may be anxious, but as the old saying goes, "There's no need to panic." "While we maintain a positive view on the U.S. stock market in 2024, there are a range of risk factors that could derail the current bull market," Dilley says.
Federal bonds are considered very safe, but as a result, returns can be low. Real estate investments can produce income but may be risky. Precious metals, especially gold, offer an alternative to stocks and bonds.
However, during a market crash, stock prices come down. This, in turn, pulls down the performance of mutual funds holding these stocks. Companies, too, face a tough time with their operations taking a hit, and it takes time for stocks to recover. Performance improves only when stocks recover lost ground.
Many people who owned stocks that went down a lot would have been OK eventually, except they bought on margin and were ruined. The best performing investments during the Depression were government bonds (many corporations stopped paying interest on their bonds) and annuities.
No. A stock price can't go negative, or, that is, fall below zero. So an investor does not owe anyone money. They will, however, lose whatever money they invested in the stock if the stock falls to zero.
Men and women lost their life savings, feared for their jobs, and worried whether they could pay their bills. Fear and uncertainty reduced purchases of big ticket items, like automobiles, that people bought with credit. Firms – like Ford Motors – saw demand decline, so they slowed production and furloughed workers.
As stocks continued to fall during the early 1930s, businesses failed, and unemployment rose dramatically. By 1932, one of every four workers was unemployed. Banks failed and life savings were lost, leaving many Americans destitute. With no job and no savings, thousands of Americans lost their homes.
What Caused the Financial Crisis of 2008? The growth of predatory mortgage lending, unregulated markets, a massive amount of consumer debt, the creation of "toxic" assets, the collapse of home prices, and more contributed to the financial crisis of 2008.
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