Where Are We At AI Hype Cycle? How We Can Trade.

As we have seen recently on how the semiconductor and tech stocks performance have dwindled towards the end of September 2024, this might makes some of us wonder are we going to see AI bubble burst?

Actually this debate is not new, it has been going on since early 2024, and market forecasters has indicated inflated expectations and over-investment in AI will likely lead to market saturation and disappointment. This is on top of the AI arms race which has been developing.

So where are we now actually in AI hype cycle, as Gartner has published its 2023 AI hyper cycle in 2023 summar, we are seeing generative AI was already reaching the “peak of inflated expectations” and close to tumbling into the infamous “trough of disillusionment.”

So we may ask where is the opportunity to trade on the back of this AI Hype Cycle?

Now we are already entering fourth quarter of 2024, so it seem like the AI market is still going strong despite we saw some weakness in the semiconductor stocks recently, but tech stocks are still performing.

And we have also seen Apple newly launched iPhone supposed to have AI features, with all these running on the cloud for end users to get faster and more efficient results, we might see the AI bubble keep inflating for the time being.

All the cutting-edge GPU chips and cloud services required to run a consumer-facing AI service at scale are costing the tech leaders hundreds of millions of dollars every month.

If we were to look at the performance of Nvidia, there is a possibility of it reach the lows of $109, and this would depend on the order of more chips might perhaps not for much longer if they cannot figure out how to get people to start paying for it.

For now, the AI market leaders are deep-pocketed tech companies willing to burn billions to get ahead, but this period of big tech subsidy won't last forever.

But similarly, we might see a downward trend for AMD.

Palantir’s Artificial Intelligence Platform (AIP) is driving a significant acceleration in its US commercial business, while underlying metrics and the bottom line are rapidly improving.

One of Palantir’s key competitive advantages is its proprietary technology. The company’s software is based on a platform called Gotham, which is designed to help organizations integrate and analyze large amounts of data. Gotham is not available to Palantir’s competitors, which gives the company a significant advantage.

So I am looking for more enterprise to get onto Palantir as data management would be the next phase in the AI hype cycle.

For the performance of Palantir since it was added to the S&P 500, it has been traded upwards, though we could see some sideways trading where the stock price is hovering below $37.

So I am expecting Palantir to clear $38.50 and hold it for at least two weeks before making an attempt for $40. I am expecting market to return to look at the AI hype cycle and clearly looked out for the winners.

One of them is Palantir.

If we were to look at the AI hype cycle we need to understand that stocks which have invested in AI are looking for ways to get out of the profitability dilemma.

One of the best way is to come up with a compelling service that a sizable amount of people will happily pay for. Yet, as it stands, generative AI is still a brilliant (but limited) tool in search of a killer use case.

And it is also important as investors to recognize the risk of overconfidence in AI, we need to manage the expectations as the hype cycle develops.

Appreciate if you could share your thoughts in the comment section whether you think AI hype cycle is going into a better development phase.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.