This is the takeaway from today's morning briefing, and what you can do subscription Received in your inbox every morning with:
Imagine that you are self-sufficient in a bubble.
Every second, the bubble inflates or deflates depending on the conditions outside the bubble.
This is the environment we could be heading into when investors put the hot AI trade under a bigger microscope. Not every day will be an inflationary day for a bubble.
And make no mistake, investors should scrutinize all things AI stocks, based on some of the bubble shenanigans this week that deserved more attention than they got.
“It's clear that we've lived in a very exciting environment, and at some point this has to become more rational,” Antonio Neri, CEO of Hewlett Packard Enterprise (HPE) (video above), told me on Yahoo Finance Live.
Neri was just hours away from surprising some investors with a 14% year-over-year decline in quarterly sales. (We thank him for continuing to come and answer the tough questions!) Full-year fiscal year sales guidance was trimmed even though HPE has billions of dollars in AI-related backlog.
So what gives?
Neri told me that companies are having difficulty implementing the AI technology they have purchased—problems that range from needing to find new power sources to securing the physical space to house equipment.
Another issue at hand is the ongoing shortage in supply of high-powered AI chips. No chips and no ability to serve orders. Simple equation.
HPE shares fell 14% in after-hours trading Thursday after earnings hit the wire. The comment and quarter was akin to a punch to the gut by Jean-Claude Van Damme.
But the stock rose again following bullish comments made by Neri Lee on margin outlook and HPE's Juniper (JNPR) completion. Acquisition later this year or early 2025.
However, HPE has given investors new reasons to worry about the hype around AI.
Likewise, PC maker HP Inc (HPQ) was reluctant to meet strong demand for upcoming AI-enabled PCs in its current full-year guidance. More on that here in my conversation with HP CEO Enrique Llores.
Meanwhile, Yahoo Finance Trending Ticker favorite SoundHound AI (SOUN) took a hit on Friday of nearly 20%. The company's earnings beat estimates, losing $88 million on a net basis last year.
“Mag-7 is measured to be a bit frothy but not in a full bubble. Valuations are a bit expensive given current and forecast earnings, sentiment is bullish but doesn't look excessive, and we don't see excessive leverage or caution billionaire hedge fund manager Ray Dalio warned in a new blog post on LinkedIn mail.
“However, one can still imagine a significant correction in these names if generative AI does not live up to the priced-in effect,” he continued.
There were some inflationary moments for the AI bubble this week as well.
Dell (DELL) shares rose 26% as investors forgot the company makes personal computers and were drawn to bullish AI comments on the earnings call.
AMD's (AMD) market capitalization surpassed the $300 billion mark for the first time on the AI hopeful, capping another win for CEO Lisa Su.
Shares of C3.ai (AI) rose 24% on Thursday after reporting earnings the day before. We're in the early stages of the AI cycle, Tech OG and C3.ai CEO Tom Siebel told Seana Smith, Brad Smith and yours truly on Yahoo Finance Live.
You were able to see that in C3.ai's sales to the government in the fourth quarter.
Whatever the case, another week of volatile life inside the AI bubble.
Brian Susie He is the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @Brian Susie and on LinkedIn. Advice on deals, mergers, activist positions, or anything else? Email [email protected].
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