Why C3.ai, Intel, Advanced Micro Devices and Other Artificial Intelligence (AI) Stocks Tumbled Friday

One of the biggest catalysts driving the market higher over the past year or so has been the emergence of artificial intelligence (AI). Companies and market observers alike recognize the potential for increased productivity to boost profits, benefiting both companies and shareholders. Investors are also awaiting the Federal Reserve Bank's insights into the future trajectory of interest rates, and when the central bank might turn the tables and start cutting rates.

In this context, AI software manufacturersC3.ai (NYSE: AI)Down 5.21 TP3T, chipmakerIntel (NASDAQ: INTC)) plummeted 5.21 TP3T, the semi-guide specialistAdvanced Micro Devices(NASDAQ. AMD) plummeted 4.21 TP3T, a specialist in internal memory and storage solutionsMicron Technology Inc. (NASDAQ: MU)) down 3.91 TP3T, foundryTaiwan Semiconductor Manufacturer Ltd. (NYSE: TSM) plunged 3.21 TP3T at the close on Friday.

By examining all the common factors such as regulatory filings, financial reports and analysts' target stock price movements, we found that there are specific company news stories that could explain stock price declines (more on that later), suggesting that many investors are paying close attention to economic and geopolitical emergencies.

Prospects for near-term rate cuts dim

Investors have been eager to embark on a round of interest rate cuts that would finally put an end to the ongoing battle to curb inflation. However, recent reports suggest that rising prices are not yet a thing of the past.

The latest monthly inflation report from the U.S. Bureau of Labor Statistics shows that inflation is surprisingly stubborn, which sent a ripple of anxiety through Wall Street. The most watched inflation indicator, the Consumer Price Index (CPI), rose by 3.5% year-on-year in March and by only 0.4% month-on-month.

Growth was higher than expected; economists were looking for a 3.4% year-on-year increase and a 0.3% increase from the previous year. prior to the report, investors had hoped that the first interest rate cut of the year would come in June, but the specter of continued inflation has dimmed those hopes.

The ongoing war between Israel and Hamas has also weighed on sentiment, as investors worry that the conflict could expand in the region.

Why Inflation Matters

So what does this have to do with our five AI stocks? The biggest issue is rising borrowing costs, as companies are less likely to expand and adopt next-generation technologies, including generative AI.

• C3.ai creates plug-and-play artificial intelligence software models for businesses. With high inflation, businesses are unlikely to be able to afford the extra expense.

• Adoption of Intel's semiconductors, which help power data centers and artificial intelligence systems, may also be slowing.

• AMD's graphics processing units (GPUs) are key components that facilitate the training and deployment of AI systems. These processors are expensive, costing tens of thousands of dollars or more, so organizations are likely to delay adoption when borrowing costs are high.

• Micron Technology, which provides flash memory and storage systems that accelerate artificial intelligence processing, will also be affected by rising interest rates.

• Taiwan Semiconductor Manufacturing Company (commonly known as TSM) is the foundry for these AI chips, so the slowdown in AI adoption means fewer semiconductors are being sold.

Leaving aside these problems, the water has been further muddied by the news of some mixed-up companies.

Bank of America(NYSE: INTEL) analyst Vivek Arya lowered his price target on the stock to $44 while maintaining a Neutral (Hold) rating. This represents a potential upside of 17% from Thursday's closing price. The analyst cited disappointing results from Intel's foundry division as a reason for the increased pessimism.

A report by Cleveland Research also states that Intel's share of the PC and server marketMaybe.Decrease. There are also reports that China has instructed telecom companies to begin phasing out the use of foreign processors, which, if true, would directly affect Intel and AMD.

The earthquake that struck Taiwan earlier this month may affect Micron's performance this quarter, as the company has not yet resumed full production of dynamic random access memory (DRAM) processors. HoweverCitibank Analyst resonance Christopher Danely (Christopher Danely) believes that this could be a positive for Micron, as the reduction in supply will lead to higher prices, noting that any reduction in revenue will be temporary.

Valuation of the whole noodle

In terms of valuation, this group of stocks is a mixed bag. AMD, C3.ai, TSM, Micron, and Intel are currently selling at 8x, 7x, 7x, 4x, and 2x forward sales, respectively, with Intel being the most attractive. When measured by forward price-to-earnings (PEG) ratios, which take into account a company's growth trajectory over time, TSM, AMD, and Intel have PEG ratios below 1, which is the standard for an undervalued stock.

I am not bullish on Intel as the company has been mired in turnarounds for years and has yet to prove successful in its endeavors. Of the recommended stocks, I see the most upside in TMS and Micron, which are leaders in the AI revolution.

Generative artificial intelligence still has a long way to go, and the opportunities are still enormous. However, investors should be prepared for significant fluctuations in the future, and try to stay on the trajectory of the Bubbles and Bubbles Right.

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Citigroup is an advertising partner of The Motley Fool's The Ascent. Bank of America is an advertising郃 partner of The Ascent, a Motley Fool company. Danny Vena does not own any of the above mentioned shares. The Motley Fool recommends Advanced Micro Devices, Bank of America, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends C3.ai and Intel with the following options: Intel January 2023 $57.50 Call Option Long, Intel January 2025 $45 Call Option Long, and Intel May 2024 $47 Call Option Short. The Motley Fool has a disclosure policy.

Why C3.ai, Intel, Advanced Micro Devices, and Other Artificial Intelligence (AI) Stocks Tumbled Friday