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When a company has a low price-to-sales ratio (PSR)*, it may show that the market undervalues its stock. and when the ratio is above average it might show that investors expect high growth in the company causing them to bid up its stock price which results in overvaluation. That seems to be the current situation with the vast majority of AI and related (AI&R) bubble stocks having PSRs well in excess of the norm.

In 3 articles posted last week (see here, here, and here) a total of 55 AI&R stocks were identified as having market capitalizations in excess of $100M in a bubble mode which is defined as having appreciated in value by more than 10% that of the latest Global X Artificial Intelligence and Technology ETF AIQ (i.e. 50%) which consists of 93 constituents as of last Friday, September the 8th. Of the 55 stocks in bubble mode, however, only 7 companies currently have PSRs of 2.9 or less and, as such, are seen as not being overvalued in spite of their inflated prices.

Below are the 7 companies, ranked in descending order of their *PSRs along with their market capitalizations, short interest** percentages, and increases in their stock prices YTD:

1. Dell Technologies (DELL):
   • PSR: 0.6
   • Market Capitalization: $51B
   • YTD Increase: 75.3%
   • Short Interest: 2.8%
2. Super Micro Computer (SMCI):
   • PSR: 1.4
   • Market Capitalization: $15B
   • YTD Increase: 381.1%
   • Short Interest: 9.0%
3. Applied Optoelectronics (AAOI): 
   • PSR: 1.4
   • Market Capitalization: $379 M
   • YTD Increase: 524.3%
   • Short Interest: 19.9%
4. BigBear.ai (BBAI):
   • PSR: 1.4
   • Market Capitalization: $263M
   • YTD Increase: 152.2%
   • Short Interest: %
5. Applied Digital (APLD):
   • PSR: 1.5
   • Market Capitalization: $513M
   • YTD Increase: 181.5%
   • Short Interest: 20.3%
6. Amazon.com (AMZN):
   • PSR: 2.3
   • Market Capitalization: $1.43T
   • YTD Increase: 64.6%
   • Short Interest: 0.9%
7. Uber Technologies (UBER): 
   • PSR: 2.3
   • Market Capitalization: $98B
   • YTD Increase: 91.0%
   • Short Interest: 2.1%

From the above analysis, it suggests that despite their major stock appreciations YTD that the stocks are not overpriced, and warrant consideration. The metrics above change daily as their stock prices do so this article will be updated weekly going forward to provide timely information.

• Definitions:
  • *The P/S ratio (PSR) describes how much someone must pay to buy one share of a company relative to how much that share generates in revenue for the company. and, as such, determines whether its stock is cheap or overpriced in comparison to its peers. While the ideal ratio depends on the company and industry, the ratio is typically good when the value falls between one (1)  and two (2) and a ratio of less than one (1`) is even better. According to Eqvista (see here), the average ratio for the semiconductor sector is 9.75 and, according to FullRatio (see here), it is 2.18 for information technology services stocks.
  • **A short interest as a percentage of float (source):
    • below 10% indicates strong positive sentiment,
    • above 10% is pretty high indicating significant pessimistic sentiment, and
    • above 20% is extremely high indicating that:
      • a high number of shares have been sold short and/or that
      • a low number of shares are available to trade meaning that
      • investors have become more bearish and that if a sudden buying frenzy were to occur, short-sellers would have to frantically cover their positions.

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