Tech Stocks Fall as Investors Begin to Question the AI Hype
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Indeed, a new report from MIT's Project NANDA said that 95% of the companies they studied haven't seen any return from their AI investments. On top of that, OpenAI CEO Sam Altman said that he believes we're in an 'AI bubble,' meaning people may be getting too excited about the tech. Altman explained that bubbles often form around something true but end up becoming exaggerated. This change in tone is a contrast from earlier this year, when AI stocks surged after strong earnings from Alphabet, Meta, and Amazon, thanks in part to their claims that AI was boosting their businesses.
Nevertheless, some investors and analysts believe that this market drop is just a natural correction. DA Davidson's five-star analyst, Gil Luria, compared it to a 'pendulum swing' by saying that the AI hype had gotten so intense that any cautious news, like Altman's comments, was enough for investors to sell. He also noted that AI still has limited real-world use cases right now, mostly in chatbots and search. However, some analysts are more optimistic. In fact, five-star Wedbush analyst Dan Ives said that we're just at the beginning of the AI revolution and believes the tech rally will continue for at least 2–3 more years as companies spend trillions on AI.
Which Tech Stock Is the Better Buy?
Turning to Wall Street, out of the stocks mentioned above, analysts think that MU stock has the most room to run. In fact, MU's average price target of $153.81 per share implies more than 31% upside potential. On the other hand, analysts expect the least from TSLA stock, as its average price target of $305.37 equates to a loss of 5.7%.
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