7 AI Stocks That Could Be Heading Six-Feet Under

Stocks to sell

If the recent sell-off with artificial intelligence stocks has you thinking that this is a prime “buy the dip” opportunity, think again. What should be top of mind instead is what are the AI stocks to sell.

There’s a good chance that the AI stock rout of April 19 was not an overreaction, but an appropriate response by the market in light of recent development with top AI software and hardware companies.

Until now, the market has priced-in continued high growth for the sector as a near certainty. Hence, the reporting of fiscal results that come up even a little short of these expectations causing massive disappointment.

That’s not all. If, one after another, the stocks with the greatest AI-related exposure fall short, a continued AI stock sell-off is likely to have a sharper impact on stocks with more dubious AI catalysts.

So, in order to take heed of this market warning, what are the AI stocks to sell? Start with these seven.

Advanced Micro Devices (AMD)

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As recently as March, it may have seemed as if 2024 was going to be Advanced Micro Devices’ (NASDAQ:AMD) “year of AI,” much like 2023 was the “year of AI” for this chip designer’s main rival, Nvidia (NASDAQ:NVDA).

However, after surging to $227.30 per share earlier this year, AMD stock has pulled back. The latest AI stock sell-off has led to a further reversal for shares. Before, investors weren’t afraid to bid up AMD, in anticipation of the company beating its own forecasts, regarding sales of its MI300 series of AI accelerators.

Now, the market is erring toward caution. Although Advanced Micro Devices may just well beat its $3.5 billion sales forecast for the MI300, not to mention end up reporting very promising initial numbers for its AI-PC chip sales, stay away as sentiment leans bearish in the near-term.

Intel (INTC)

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Intel (NASDAQ:INTC) is a good example of what I was talking about above regarding questionable AI stocks to sell. During the previous fall and winter, investors warmed back up to this chipmaker, due to increased appreciation of its own AI chip catalyst.

This catalyst joined another existing catalyst, Intel’s build out of its foundry business. With two catalysts in play, the market became very much more confident in a possible INTC stock comeback after years of underperformance. Since then, however, cracks have emerged with the foundry catalyst, as I’ve pointed out previously.

Going forward, China-related headwinds could keep shares trending lower. It’s also possible that uncertainty about Intel’s initial foray into AI chips increases as well. INTC is no longer priced as if a turnaround is guaranteed. Wait until this stock, trading for 25.2 times forward earnings, once again sports a heavily-discounted valuation.

Palantir Technologies (PLTR)

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After looking at two AI hardware stocks, let’s look at Palantir Technologies (NYSE:PLTR), which since last year has been one of the hottest AI software stocks out there.

Admittedly, Palantir has been both aggressive and successful in capitalizing on the generative AI growth trend. At least, based on the enterprise software company’s results from Q4 2023.

Even as PLTR stock has sold off in recent months, Palantir’s AI growth catalyst remains overly baked into its valuation. Shares sell for 62.2 times forward earnings. With shares this pricey, the market may get scared off by any indication of an impending growth slowdown.

Such an indication could arrive as soon as a few weeks from now post-market on May 6, Palantir next reports earnings. Even if results beat expectations, underwhelming guidance or customer growth numbers could drive a post-earnings plunge.

Super Micro Computer (SMCI)

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Super Micro Computer (NASDAQ:SMCI) is one of the top AI stocks to sell. After all, it’s the AI stock that’s driven the aforementioned sharp sell-off.

Why has the market especially bailed on shares in this AI server builder? Mostly, because the company has decided not to release preliminary quarterly results.

Investors perceive this to mean disappointment, when Super Micro’s latest fiscal performance and updates to guidance hit the street on April 30.

SMCI stock skeptics have argued that recent growth, boosted by the tech sector’s AI arms race, is likely to slow down. If proven correct, die hard and fair weather bulls alike may bail.

With this, it is very risky to continue holding a position in SMCI right now. Earnings are just a week away, and those deciding to hold on through earnings could end up “holding the bag,” as shares continue to plummet.

Snowflake (SNOW)

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Snowflake (NYSE:SNOW) shares have been affected somewhat by the AI stock sell-off, but these declines pale compared to massive sell-off shares experienced after the cloud data provider’s most recent quarterly earnings release in late February.

As I have discussed previously, SNOW stock avalanched lower, due to both weak guidance, as well as an unexpected announcement of a CEO change. Since then, shares have kept declining, as investors walk back expectations. However, with the market sentiment about AI stocks in general shifting toward bearish, look out! Another big avalanche may be in the cards for SNOW shares.

Gen AI has been considered a growth catalyst for Snowflake. If the market’s excitement about this trend is declining, a further reassessment for Snowflake’s future growth prospects may soon follow. SNOW trades at a staggeringly-high 152.6 times earnings. This leaves big room for a rerating to the downside.

SoundHound AI (SOUN)

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SoundHound AI (NASDAQ:SOUN) is another example of a speculative name among the AI stocks to sell. As InvestorPlace’s Larry discussed back in February, shares in this voice AI company skyrocketed in price, following news that Nvidia had invested in the company.

Frenzy among meme speculators about SOUN stock persisted through March, yet so far this month, it has declined spectacularly. Initially, because of news of the company’s plans to raise $150 million in capital through an at-the-market equity program. Shares sold off in response to the dilutive impact that this capital raise will have.

The broad sell-off in AI stocks is placing more pressure on SOUN. A market more cautious about AI plays likely means further big downside ahead. Even as this upstart still has Nvidia in its corner, as this $3.25 stock could quickly return to pre-meme prices of under $2 per share, stay away.

Taiwan Semiconductor Manufacturing (TSM)

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Taiwan Semiconductor Manufacturing (NYSE:TSM) had a rough go of it this week. First, following the leading chip foundry’s latest earnings release on April 18, shares experienced a modest decline.

Despite what was a solid earnings report overall, investors focused on the major negatives with the release.

Namely, downbeat statements from management about overall chip demand this year. Then, TSM stock sank again on April 19. This time, because of the market jitters related to Super Micro Computer spilling over to other chip stocks. In the immediate term, further fears about an AI chip demand slowdown could place more pressure on TSM.

Also, don’t forget that there’s the “known unknown” of a possible China-Taiwan conflict eventually happening. TSM’s valuation of just 20 times forward earnings may not fully account for all of these risks. With this, consider it best to sell and sit on the sidelines for now.

On the date of publication, Thomas Niel did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.

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