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Artificial intelligence continues to be a major driver of the stock market. AI is expected to eventually impact every aspect of our lives and open up huge new frontiers in the technology field. Bloomberg Intelligence predicts that AI will become a $1.3 trillion market by 2032. Many predictions say the market will be even bigger within 10 years. Explosive growth has put AI stocks in the spotlight and increased demand among investors.
But be careful. Not all companies and stocks related to AI are worthy of capital investment. There are already winners and losers in the AI field.companies such as microsoft (NASDAQ:MSFT) is moving forward while others like it C3.ai (New York Stock Exchange:A.I.) are left alone. The trick for investors is to separate the proverbial wheat from the wheat when it comes to the future of AI stocks and the industry.
Here are some warnings about stock market crashes: Don’t get caught owning these 3 AI stocks.
Adobe (ADBE)
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software company adobe (NASDAQ:adobe) is already a bad stock to own. In a market crash, that could be downright terrible. ADBE stock plunged 12% after the company released its latest financial results in March. The company, which makes popular products such as Photoshop and Illustrator, managed to beat expectations on sales and bottom line profits, but its outlook disappointed analysts and investors. Through four months of this year, Adobe’s stock price has fallen by 16%.
Adobe is doing its best to add AI technology to its suite of software products. The company recently announced an AI assistant for the Reader and Acrobat apps. But, somewhat ironically, AI appears to be an existential threat to businesses. ADBE stock began selling last year after privately held OpenAI introduced Sora, an AI platform that can generate videos based on written instructions. Some analysts feel it’s only a matter of time before AI replaces Adobe’s suite of creative software products.
Adobe is currently considering partnering with OpenAI to add the company’s technology to its software. Only time will tell if it will be successful. Meanwhile, ADBE stock continues to fall.
IBM
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International Business Machines Corporation (New York Stock Exchange:IBM) is also doing its best to capitalize on the AI boom, recently announcing plans to spend $1 billion to expand its semiconductor packaging and test facility in northern Canada. During the first quarter of this year, IBM provided AI assistants to her corps of 160,000 consultants to help them increase productivity. But despite its efforts, the introduction of AI cannot hide the many problems facing this legacy technology company.
IBM stock recently fell 10% after the company reported mixed financial results and announced it would acquire the cloud software maker. Hashi Corporation (NASDAQ:Health care workers) won $6.4 billion in a deal expected to strengthen its cloud computing services. Analysts are skeptical about the deal and don’t seem concerned about IBM’s earnings. The technology company posted higher profits in the first quarter, but sales did not grow. This was IBM’s third revenue decline in the past five quarters. IBM stock has fallen 13% in the last month, and is up just 2% since the beginning of the year.
Intel (INTC)
Early April, intel (NASDAQ:INTC) announced a new AI microchip called “Gaudi 3”. The company says it can be used to train and deploy large-scale AI models and chatbots. Intel claims the new AI chip is more than twice as power efficient and 1.5 times faster than previous AI chips. Nvidia’s (NASDAQ:NVDA) Competing H100 microchip widely used in AI. Intel said the new Gaudi 3 chip will be available to customers in the third quarter of this year, but did not disclose the price of the new chip.
It will be difficult for Intel to take share from Nvidia in the AI chip market. Nvidia currently holds an estimated 75% to 80% share of the AI chip market, with graphics processors known as GPUs now the standard for running AI applications and models. In March of this year, Nvidia announced its new B100 and B200 GPUs, the successors to the blockbuster H100 chip and even more powerful. Intel has also struggled to pivot into its microchip and semiconductor foundry business.
Since the beginning of April, INTC stock has fallen more than 30%. In five years, the stock price has fallen 41%.
At the date of publication, Joel Baglole held long positions in NVDA and MSFT. The opinions expressed in this article are those of the author and are subject to InvestorPlace.com Publishing Guidelines.
