Investors are buying more than just AI. That’s good news.
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After years of artificial intelligence leading then market’s rally, it appears that investors are finally looking beyond that area of tech and its beneficiaries for opportunities, which means an increasing number of stocks are joining the party. As a bonus, they’re often cheaper, as well. Multiple concerns, among them increasing debt, fierce competition, and execution risks, led to a selloff of AI stocks in mid-November.
Although AI plays have since bounced off their lows, the real action has been elsewhere in the market—including riskier areas that show investors aren’t just hunkering down. Even with AI’s revolutionary potential, growing concern is understandable. “Some lenders and investors are cautioning against the risks, with Oaktree Capital Management LP co-founder Howard Marks warning that some data centers may be rendered uneconomic and some owners may go bankrupt," wrote Mizuho Securities Managing Director, Equity Trading Daniel J.
O’Regan in a Friday note. Even if worst-case scenarios don’t play out, increased AI skepticism could just be a reaction to how bid up–and expensive–these stocks are. Broadcom’s beat-and raise fourth-quarter earnings, posted after Thursday’s market close, nonetheless may have market participants thinking twice.
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