A lower forecast for AI products leaves the market in a risky place.
NAS 100 – Daily Chart
The Nasdaq 100 index has had support since 2020, and trades have been at resistance levels since mid-2021. If the breakout above caused a price blow, the market could see resistance here. If sentiment remains bullish, the 20,000 level would be the next target.
Technology blog “The Information” said:
“In the past year, major technology firms have championed generative artificial intelligence as the next big thing, boosting the stock market to new highs. But behind the scenes, representatives of major cloud providers and other firms that sell the technology are tempering expectations with their salespeople, saying the hype about the technology has gotten ahead of what it can actually do for customers at a reasonable price”.
Analysts have also started to cite data showing a slowdown in Google searches for “Chatbot,” alongside fewer mentions of AI from company earnings releases.
Recent inflation data has also damaged the expectation for early and rapid interest rate cuts from the US Federal Reserve. However, the market remains priced for perfection. Share buybacks will also slow as we reach the end of the fiscal quarter.
Companies like Nvidia are supporting a broader market rally. However, they are at the front end of the market with chip support to build AI products. Analysts are concerned that the financial outcome of those products is being overstated.
Tech stocks remain vulnerable to higher inflation and a softer earnings season. The big tech companies launched their premium AI assistant tools with much hype. However, they will have to prove that there is a consumer appetite for higher prices.
