Why AI and specialty technology stocks plummeted today

Recently, there have been transactions in which artificial intelligence (AI) stocks and specialty high-tech stocks soared in price. But Tuesday was not among them.

Concerns spread across the tech sector about investors’ hedging against leading tech hardware titles, impacting the stock prices of many niche players. AI solution developer C3.ai (A.I. -2.06%) The stock price fell nearly 6% that day. pure storage (PSTG -0.97%) It wasn’t far behind with a 5% drop.Two other prominent specialist technology companies, data analytics giants snowflake (snow -0.08%) Next generation database experts Mongo DB (MDB 0.16%)both fell more than 4%.

Waiting for Nvidia

The monster company the market feared on Tuesday was the graphics processing unit (GPU) giant Nvidia (NVDA -2.57%)One of the “Magnificent Seven” high-tech stocks.

Nvidia is scheduled to release its fourth quarter 2024 financial results after market hours on Wednesday. Investors have clearly been closely monitoring recent stock price movements and are hedging risk by selling some of their holdings for fear of disappointing performance.

One of the main reasons why Nvidia’s popularity has exploded among investors is its position in the AI ​​space. We sell and develop many powerful products used for AI capabilities. The investment community has actively dabbled in just about any stock, even one that is casually associated with AI. Nvidia is a company at the very center of that rapidly growing technology.

That’s why NVIDIA stock has been so hot in recent weeks and months, by Tuesday anyway. Despite today’s pullback, its value is up nearly 12% this month alone, 39% year-to-date, and an astonishing 232% over the past year.

When the company, an important and influential hardware manufacturer, sneezes, many of its colleagues catch a cold. C3.ai, Pure Storage, Snowflake, MongoDB, and many peers are involved in AI to varying degrees. This involvement will only deepen in the future.

Time to differentiate

Of course, these companies are not created equal. You shouldn’t sell these just because the market is nervous about his Nvidia. However, many companies, like their processor-making peers, have seen their stock prices rise significantly due to their connections to AI. At times, it appears that investors invest indiscriminately, without regard to business focus, strategy, or potential.

All eyes will be on Nvidia to release these quarterly numbers on Hump Day this week. In the next trading session, you should be prepared for sharp price movements that could be up or down.

Eric Volkman has no position in any stocks mentioned. The Motley Fool has positions in and recommends MongoDB, Nvidia, and Snowflake. The Motley Fool recommends his C3.ai. The Motley Fool has a disclosure policy.

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