This week’s drop in tech and AI stocks has created several buying opportunities, as indicated by a widely-used technical measure. On Thursday, the major U.S. indexes experienced their toughest day in a month, as investors moved away from the largest tech stocks amid worries about rising valuations tied to AI transactions. Although the Nasdaq Composite Index managed to bounce back on Friday, recouping some losses, it was still down 3.5% for November.
Using the CNBC Pro stock screener, we examined S&P 500 stocks that faced considerable pressure this week, especially those with a 14-day Relative Strength Index (RSI) indicating they’re oversold. This analysis revealed several companies, including database management firm Oracle and frozen potato product supplier Lamb Weston Holdings. Stocks with a 14-day RSI below 30 are classified as oversold, and they might quickly recover.
Oracle, which also offers cloud infrastructure services, was prominently featured as one of the most oversold stocks, with an RSI just above 24. Its share price dipped nearly 6% this week, marking a roughly 35% decline since reaching a peak on September 10. However, it remains up 35% year-to-date. Concerns have been raised about Oracle’s heavy reliance on the bond market for financing AI infrastructure projects. Following a recent downturn, Bank of America reestablished market-weighted credit ratings on Oracle’s debt, urging for more clarity in financial policies given the capital-intensive nature of its business. Analyst Tom Curcuruto noted that while there are positive growth drivers for Oracle, challenges such as competition in AI, uncertainties around capital expenditures, and negative free cash flow overshadow them.
Another name on the oversold list is chip manufacturer Super Micro Computer, which has an RSI below 27. The stock has plummeted 30% in November and is down 45% from highs earlier this year. Struggling profit margins and disappointing first-quarter results contributed to negative sentiment. Analysts have mixed opinions on Super Micro; however, the consensus price target indicates nearly 23% upside potential. Among 20 analysts, 2 classify it as a strong buy, 7 as a buy, and 8 as a hold.
Lamb Weston, known for frozen potato products, is currently the most oversold stock, with an RSI below 29. Its stock has declined by 11% over the last month and is down 32% from its 52-week high, largely due to reduced consumer demand. Yet, despite its poor performance, analysts project Lamb Weston could rise about 17% in the next year. They noted that in its fiscal first quarter ending in August, the company made strides in cost reductions and surpassed adjusted profit and revenue forecasts.
Other stocks on the oversold list this weekend include Molina Healthcare and Charter Communications.
