In recent times, there have been trading sessions where artificial intelligence (AI) and specialty tech stocks roared higher in price. Tuesday, however, was not one of them.
On investor hedging with a leading title in tech hardware, concern spread throughout the tech sector and affected the stocks of many niche players. AI solutions developer C3.ai(NYSE: AI) took a nearly 6% hit to its price that day, while Pure Storage(NYSE: PSTG) wasn't far behind with a 5% drop. Two other prominent specialty tech companies, data analytics giant Snowflake(NYSE: SNOW) and next-generation database expert MongoDB(NASDAQ: MDB), both fell more than 4% lower.
Waiting on Nvidia
That monster company the market was worried about Tuesday was graphics processing unit (GPU) behemoth Nvidia(NASDAQ: NVDA), one of the "Magnificent Seven" tech stocks.
Nvidia is scheduled to publish its fourth quarter of fiscal 2024 results after market hours on Wednesday. Investors were clearly taking a hard look at how the stock has fared recently and, fearing an earnings disappointment, hedging their bets by selling off some of their holdings.
One of the major reasons for Nvidia's explosion in popularity with investors is how it's positioned in the AI space. It sells, and is developing, many of the powerful goods used for AI functionalities. The investment community has been eager to get their hands on nearly any stock even casually associated with AI; Nvidia is a company at the very heart of that booming technology.
That's why -- previous to Tuesday, anyway -- Nvidia's stock has been such a hot item in recent weeks and months. Even with today's pull-back, its value has risen by nearly 12% this month alone, 39% year to date, and an eye-watering 232% over the past year.
As an important and influential hardware maker, when that company sneezes many peers catch a cold. To varying degrees, C3.ai, Pure Storage, Snowflake, MongoDB and many peers are involved in AI. This involvement will only deepen in the future.
Time for some differentiation
These companies, of course, are not created equal. They shouldn't be sold off simply because the market's getting nervous about Nvidia. Yet, like their processor-making peer, quite a few have seen notable share price lifts because of their association with AI. At times, it seems that investors are plowing indiscriminately into them, regardless of business focus, strategy, or potential.
All eyes will be on Nvidia when it reports those quarterly figures on Hump Day this week. We should be ready for some potentially sharp price movements, either upwards or downwards, in the following trading session.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends MongoDB, Nvidia, and Snowflake. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
