Large companies such as Nvidia have already benefited hugely from the AI boom, but many smaller companies have not yet. However, they could now sprint ahead with the expected fall in interest rates, say traders.
29 February, 2024 FRANKFURT (Frankfurt Stock Exchange). More and more new records on the stock market - and not just for the DAX. On Wall Street, the Dow Jones, S&P 500 and Nasdaq reached new record highs last week and are barely below them this week. "There is a gold-rush mood," notes Marc Richter, who trades foreign stocks for Baader Bank.
However, it is mainly a few large stocks that are pulling the market upwards: the Magnificent Seven, i.e. Amazon, Apple, Meta, Microsoft, Alphabet, Tesla and Nvidia. The higher interest rates have not affected them, and business is going well anyway. "However, smaller companies have suffered from the higher interest rates, even if the business model is right," Richter notes. With key interest rates falling again, the previous underperformers could now become outperformers.
C3 AI and Uipath: second-tier catch-up?
Possible examples are C3 AI (US12468P1049) and Uipath (US90364P1057), both traded at Baader Bank.The Californian company C3 AI, founded by billionaire entrepreneur Tom Siebel, specializes in enterprise AI. There was huge enthusiasm at the IPO in 2020, with the share price doubling on the first day alone.Then came disillusionment, with the share price falling from 115 euros to 10 euros.Yesterday, Wednesday, C3 AI presented its quarterly report, which was well received on the stock market.
The New York software company Uipath had a similar share price performance to C3 AI. The share price fell from 65 euros in 2021 and 2022 to around 11 euros.The lows have already been passed: Uipath is currently trading at EUR 21.20 again.The company, founded in Romania, offers an AI-based platform for process automation.
Vorhauser
Twilio and AMD too heavily punished?
For Walter Vorhauser from Oddo BHF, Twilio (US90138F1021) is an interesting growth stock and potential AI winner. The Californian company offers an AI-supported cloud communication platform. This enables companies to address customers across all channels via SMS, video, email, WhatsApp and more.
However, the quarterly and annual figures published in the middle of the month caused disappointment, as the market had expected even more.The share price fell from 65 to currently 54 euros."However, Twilio has grown strongly and was able to stem its losses," explains Vorhauser.
Chip manufacturer Advanced Micro Devices (US0079031078), which has so far been overshadowed by competitor Nvidia in the AI sector, could also catch up according to Vorhauser. However, the share has recently lost ground after a brilliant rise at the beginning of the year. The reason: AMD missed market expectations with its forecast for business in the current quarter.
"But AMD could also become an AI profiteer. One major success, for example, is that Japan's JR Kyushu Railway Company will use AI-based AMD technology to automate track monitoring."
Richter
"Trust is back"
As far as the current tech boom is concerned, Vorhauser certainly recognizes parallels with the technology hype 24 years ago. However, he does not see a bubble that could soon burst."The rally has not yet reached the masses," he says. Marc Richter considers minor corrections to be "normal and healthy". There are also risks. For example, there could be danger from China, he says with regard to China's small caps, which have already lost a lot this year.Nevertheless, Richter is confident overall: "Confidence in new markets has returned."The big stocks have led the way."Now the small ones should follow."
by: Anna-Maria Borse © February 29, 2024, Deutsche Börse AG
Anna-Maria Borse is a financial and business editor specializing in the financial market/stock exchange and economic topics.
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