AI Stock Bubble: Why are AI Stocks Going Down?
AI stocks began to soar since the launch of OpenAI’s ChatGPT in late 2022 but have started crashing after racking up massive YTD gains. Here’s why AI stocks are going down after soaring to the moon.
The AI Stock Bubble is Beginning to Burst
Stocks trade based on two key factors: earnings and emotions. Emotions affect stock prices in the short run while earnings dictate stocks in the long run.
Since ChatGPT launched, investors have gone crazy and sent AI stocks soaring in price. Here are some YTD performances on the most popular AI stocks.
| Company (Ticker) | YTD Gains |
|---|---|
| C3.AI | 121% |
| SoundHound AI | 174% |
| GuardForce AI | 113% |
AI stocks have started rising to unrealistic prices driven up by greed and excessive buying. It was only a matter of time until the momentum faded and traders moved on to other meme stocks.
The Same Thing Happened to EV, Cannabis, and Metaverse Stocks
Stock bubbles don’t last extremely long but can cause massive losses if you don’t get out of the stock while it’s crashing.
Over the past few years, there have been several stock bubbles that caused sector related stocks to soar including:
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- EV Stock
- Cannabis Stocks
- Metaverse Stocks
- SPAC stocks
Take Your Profits Then Get Out of The Stock
It’s best to get in early in these stocks before the share prices start soaring to the moon. Traders may drive the stock prices up in the short run but they will crash over time if the underlying company doesn’t perform well in terms of revenue and earnings.
