AI Sector Stalling: Only 4 Of 7 Categories Went Up In March

Photo by Steve Johnson on Unsplash

An Introduction

In recent weekly articles I had suggested that the AI sector was weakening and that was clearly evident in the results of March. The Global X Artificial Intelligence & Technology ETF (AIQ) of 91 constituents, which best reflects the AI sector as a whole, had gone up 8.4% in February but was only up 2.0% in March. On a specific AI category basis, while no category had gone down in February, 3 of the 7 categories had done so in March confirming, as I had suggested in my article last week, that "the surge in this sector is stalling".  This article has the details - an overview - of how each category is trending.

7 AI Categories Compared

Below is how each category performed last week in comparison to each other, to help you make prudent investment decisions going forward. The categories are presented with data:

• for this month, in descending order,
• YTD to provide a short-term trend in each category, and
• since the sector went into bubble mode at the end of October to provide a 5-month trend since then.
• along with a description of what makes up each category,
• the stocks included in each category
• and commentary on those stocks that made significant moves last week, where available.

1. AI-enabled Personal Computer Category: up 9.9% in March; up 16.7% YTD; up 32.3% in last 5 Month
   • Description: A computing revolution is beginning as a result of the introduction of neural processing units in the latest chip designs which will result in a coming decade of growth in PC upgrades and innovation. This portfolio tracks the stock performances of the companies that have introduced, or plan to introduce, AI-enabled PCs in 2024.
   • 4 Constituents: DELL (+20.5%), MSI (+7.4%), HPQ (+6.7%) and LNVGY (+5.0%).
   • Articles:
     • Is Dell Technologies Stock Undervalued Right Now?
     • Motorola (MSI) is a Top-Ranked Growth Stock: Should You Buy?
     • Why Is HP (HPQ) Up 6.7% Since Last Earnings Report?
     • Lenovo (LNVGY) Unveils Hybrid AI Solutions in Collaboration with NVIDIA
2. Quantum Computing Category: up 3.9% in March; up 8.6% YTD; up 32.7% in last 5 Month
   • Description: Quantum computing is still years away but it will change the world when it arrives and, as such, it is important to keep abreast of the major companies involved in its research and development and this portfolio does just that.
   • 9 Constituents: MU (+30.1%), QBTS (+10.3%), BIDU (+3.9%), HON, IBM, INTC, IONQ (-3.6%), AMD (-6.3%) and RGTI (-18.6%).
   • Articles:
     • Earnings Estimates Rising for Micron Technology (MU): Will It Gain?
     • Wall Street Analysts See D-Wave Quantum (QBTS) as a Buy: Should You Invest?
     • Investors Heavily Search Baidu (BIDU): Here is What You Need to Know
     • AMD Stock Is Down 15% From Its 52-Week Highs, and Here's Why You Should Buy It
     • Rigetti Computing (RGTI) Reports Mixed Results Amid Strategic Advances in Quantum Computing
3. Semiconductor (Chip) Category: up 3.3% in March; up 25.5% YTD; up 66.0% in last 5 Month
   • Description:  The price of AI chip stocks surged by 64% in 2023 and many analysts think there is an excellent chance that the boom will continue in 2024 and this portfolio tracks the stock performances of the major players in this category.
   • 15 Constituents: MU (+30.1%), NVDA (+14.2%), MKSI (+8.3%), QCOM (+7.3%), TSM (+5.7%), ENTG (+4.6%), LRCX (+3.6%), AMAT, AVGO, MRVL, ASML, KLAC, ATEYY (-5.1%), MPWR (-5.9%) and AMD (-6.3%).
   • Articles:
     • Micron Technology Stock: Buy Hand Over Fist
     • Nvidia Stock Soared 82.5% in the 1st Quarter of 2024 -- Here's What Drove the Leading AI Stock
     • Why Is MKS Instruments (MKSI) Up 16.9% Since Last Earnings Report?
     • Qualcomm (QCOM): An Incredibly Cheap AI Stock to Buy Before It Surges Higher
     • Taiwan Semiconductor (TSM): Here is What You Need to Know
4. Custom Design EDA Software Category: up 1.5% in March; up 6.9% YTD; up 24.5% in last 5 Month
   • Description: The stock prices of electronic design automation (EDA) software companies creating custom designed chips is set to take off given a projected 11% CAGR in the category between now and 2028. This portfolio tracks the stock price changes of 3 companies in this category.
   •  3 Constituents: ANSS (+3.9%), CDNS (+2.3%) and SNPS (-0.4%) which is acquiring ANSS.
   • Articles:
     • Ansys (ANSS) Up 2.3% Since Last Earnings Report: Can It Continue?
     • Cadence Design Systems (CDNS) Stock is Loved By the Big Money
     • Synopsys (SNPS) Registers a Bigger Fall Than the Market: Important Facts to Note
5. AI-Powered Drug Discovery Category: down 1.6% in March; down 9.4% YTD; up 42.7% in last 5 Month
   • Description: AI-powered drug discovery holds massive potential to increase the accessibility of drugs and to treat presently incurable conditions and this portfolio highlights the most prominent clinical-stage biopharma tech companies using AI to power their research and development.
   • 8 Constituents: LTRN (+83.0%), ABSI (+7.4%), SDGR (+6.0%), ABCL (-11.1%), BTAI (-11.3%), EXAI (-14.0%), RLAY (-17.2%) and RXRX (-25.9%).
   • Articles:
     • Lantern Pharma (LTRN) Reports Progress and Financials for FY 2023
     • Absci Corp (ABSI) Earnings: Misses Revenue Estimates and Reports Increased Net Loss
     • BioXcel Therapeutics (BTAI) Full Year 2023 Earnings: Revenues Disappoint
     • Exscientia (EXAI) Business and Financial Update for the Full Year 2023
     • Recursion Pharmaceuticals (RXRX) Director Blake Borgeson Sells 20,054 Shares
6. Cloud Computing Category: down 3.9% in March; up 5.2% YTD; up 18.1% in last 5 Month
   • Description:  The cloud computing market is forecast to expand at a 17% CAGR between 2022 and 2027 which should bode well for the stock performances of the cloud computing companies that this portfolio tracks.
   • 8 Constituents: BOX (+9.9%), ANET (+4.5%), DBX, DLR, VRSN, PSTG, DDOG (-6.0%) and EQIX (-7.1%).
   • Articles:
     • Do Box's (NYSE:BOX) Earnings Warrant Your Attention?
     • Arista Networks (ANET) Laps the Stock Market: Here's Why
     • Datadog (DDOG) Forms New Base, But It Has This Flaw
     • Equinix (EQIX) commences investigation into short-seller Hindenburg's report
7. Cybersecurity Software Category: down 5.2% in March; up 4.3% YTD; up 34.3% in last 5 Month
   • Description: Given the anticipated 14% increase in spending on cyber security in 2024, this portfolio tracks the performance of the largest cyber security software stocks expected to realize sizable returns again in 2024.
   • 10 Constituents: TENB (+2.6%), CHKP (+2.0%), CRWD, CYBR, QLYS, FTNT, VRNS (-7.1%), PANW (-8.5%), S (-17.3%) and ZS (-20.4%).
   • Articles:
     • Tenable (TENB) Delivers Zero Trust Cloud Functionality for Kubernetes
     • Check Point (CHKP) Announces a New Collaboration with Microsoft to Supercharge Infinity AI Copilot with Microsoft Azure OpenAI Service
     • Palo Alto Networks (PANW) Insiders Sold US$20m Of Shares Suggesting Hesitancy
     • SentinelOne (S) CFO David Bernhardt Sells 11,221 Shares 
     • Zscaler (ZS) Stock Plunged 20% In March: Here's Why the Trend Might Reverse

The AIQ Global X Artificial Intelligence & Technology ETF (AIQ) of 91 constituents is now up 8.9% YTD and up 29.8% in the past 5 months.

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