Where Will the US Stock Market Head in June After Dell's AI Setback?
$Dell Technologies Inc.(DELL)$ had been riding high alongside $NVIDIA Corp(NVDA)$ , both soaring to new heights. Dell became Wall Street's darling with the concept of AI PCs. The company recently announced a line of AI PCs powered by $Qualcomm(QCOM)$ processors and struck a strategic partnership with Nvidia.
But Dell's earnings report sent shockwaves, with shares plunging over 20% at one point and closing down over 17%. This shows Wall Street's fickle nature towards AI-related stocks — one moment adoring, the next scrutinizing growth like a hawk.
In March, the market had whispers of an AI bubble, bigger than the dot-com bubble of 2000. But opinions were divided. Some warned of a major bust, while analysts said today's winners have strong fundamentals, unlike the internet bubble.
Right now, this tech revolution is still in the capital investment phase. Tech giants and governments are hungry for high-end chips, making Nvidia rich. These giants have ample cash flow to keep spending.
But here's the catch: AI hasn't yet significantly improved overall productivity. Recent earnings reports show downstream profitability is still lagging.
If this doesn't change, the capital investment from these giants won't last forever, and Nvidia's "lone star" status won't last.
If AI fails to revolutionize productivity as expected, we'll see a stock market meltdown.
But from the giants' investments, it seems AI's potential is still huge. Nvidia's risk lies in its current high valuation and potential competition.
May ended on a sour note, and volatility in US stocks will likely increase from here. But trading will still focus on the AI supply chain. But if downstream profits don't improve, Nvidia won't be alone in its struggles.
$Apple(AAPL)$ 's been slow to embrace generative AI compared to $Microsoft(MSFT)$ and $Alphabet(GOOG)$ $Alphabet(GOOGL)$ , and its stock has suffered.
On June 11th, Apple's Worldwide Developers Conference could reveal its AI plans and progress, potentially sparking a new rally. Let's see what happens!
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