Short sellers made huge profits this week by betting against artificial intelligence stocks, as the recent hype around AI started to cool off. More specifically, according to data from S3 Partners, traders shorting AI-related stocks made $5.6 billion in profits over just two trading days. Interestingly, many experts are starting to question whether the AI trend is becoming a bubble. In fact, OpenAI CEO Sam Altman recently compared the current excitement in AI to the dot-com bubble of the early 2000s, which caused the Nasdaq (QQQ) to eventually lose over 80% of its value.
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Furthermore, a new report from MIT’s Project NANDA found that 95% of companies using AI haven’t yet seen a return on their investment. As a result, stocks from the so-called “Magnificent Seven” have taken a hit. Meta Platforms (META) dropped 4% in the past week, while Nvidia (NVDA) fell 3.8%. At the same time, Microsoft (MSFT) and Apple (AAPL) lost nearly 3%. Alphabet (GOOGL) also declined by 1% to help short sellers earn over $2.8 billion by betting against these giants. Notably, $1.1 billion came from Meta alone, after short sellers placed $4.7 billion in bets against it last week.
Losses were even steeper among smaller AI-focused and semiconductor companies. Indeed, Advanced Micro Devices (AMD) fell more than 10%, while Broadcom (AVGO) and Micron Technology (MU) both slid over 5%. CoreWeave (CRWV), a company that builds AI data centers for Microsoft and Meta, plunged 24%. In addition, Palantir Technologies (PLTR), which had doubled in value since April, lost over 15% in its worst losing streak since March, giving short sellers another $1.6 billion in gains.
Which Magnificent Seven Stock Is the Better Buy?
Turning to Wall Street, analysts think that MSFT stock has the most room to run out of the Magnificent Seven stocks. In fact, MSFT’s average price target of $624.08 per share implies more than 23% upside potential. On the other hand, analysts expect the least from Tesla (TSLA) stock, as its average price target of $307.23 equates to a loss of 5%.
