As chipmakers weigh down the S&P 500, artificial intelligence companies appear to be some of the most oversold stocks this week. The broad market index dropped 1.6%, while the iShares Semiconductor ETF (SOXX) saw a decline of over 10%. This sell-off came as investors started questioning the significant spending on AI. Reports of delays in Alphabet’s new AI model and Taiwan Semiconductor Manufacturing Co.’s announcement of increased spending fueled concerns. However, it seems like some stocks might have plummeted too much and could potentially recover.
CNBC Pro identified S&P 500 stocks with a relative strength index (RSI) below 30, which signals they’re oversold. Oracle topped this list with an RSI of 17.4. The company dropped 10% this week, hitting a 52-week low on Friday. Oracle is in the process of raising additional funds for AI investments, having announced plans to generate $40 billion through a combination of debt and equity financing. They reported a staggering negative free cash flow of nearly $24 billion for the fiscal year. Still, Wall Street seems optimistic, with 35 out of 44 analysts recommending a buy.
Supermicrocomputers also made the list with an RSI of 25.3, down more than 14% this week due to dwindling confidence in AI expenditure. Recently, the company revealed plans to generate $7 billion through an equity financing deal aimed at hardware acquisitions. LSEG indicates that 13 out of 22 analysts covering this stock have given it a Hold rating.
IBM faced a significant downturn, dropping 26% this week after lackluster earnings reports on Tuesday. The company reported adjusted earnings of $2.93 per share against revenues of $17.2 billion, which disappointed analysts. The stock experienced its worst trading day ever, falling 25% following this news.
Despite the overall weak performance of the market, some S&P 500 stocks remain overbought, with RSIs above 70, indicating that they could potentially see declines. Cintas is among them, sporting an RSI of 77.2. Their shares surged approximately 14% this week after the company reported fourth-quarter results that exceeded analysts’ expectations. The stock continued to rise on Thursday following an upgrade from Bank of America. The analyst consensus on Cintas, according to LSEG, is somewhat divided—10 analysts rated it as a buy, 10 as hold, and 1 as sell.
PayPal also stands out with an RSI score of 76.4, climbing 22% this week. Its stock jumped 17% on Wednesday after a report about Stripe and Advent International planning to acquire the company for $60.50 per share in an all-cash transaction valued at $53.4 billion.
