The AI rebelled on Tuesday, supporting the threat that US and Canadian officials would escalate the trade wars of both countries.
Super Micro Computer (SMCI) was the best-performing stock in the S&P 500 on Tuesday, up 10.7%. Several other popular AI stocks were one of the best performers of the day, including nuclear provider Vistra (VST), a 5.4% increase and AI chip giant NVIDIA (NVDA).
AI stocks may have found some support on Tuesday by investors willing to buy DIP after a dramatic pullback. Stock in AI software company Palantir (PLTR) lost around 40% of its value during the end of yesterday, starting at a record high in mid-February. The stock rebounded 4% today. Applovin (APP), which surged over 700% due to AI fuel growth last year, has now rebounded by about 8% today, down more than 50% from its record high in mid-February. Tesla (TSLA) fell 15% yesterday, closing 53% from post-election highs, moving nearly 4% on Tuesday.
The Sky-High valuation was one of the main reasons that AI stocks were particularly hard hit by the sale of tariffs. However, AI trade had already lost momentum before Trump's tariffs shook the wider stock market. Overexpenditure on AI infrastructure, slowing growth at AI Hellwether Nvidia, and concerns about competition from Chinese competitors have stalled the AI rally from late January to early February.
UBS analysts in Tuesday's memo expressed optimism that the current sale will unfold like a similar defeat in 2018. Analysts claimed it was a tech slump during Trump's first term.
According to analysts, there is a risk in the escalation of a trade war. “However, the AI foundation is still unharmed, so investors should not lose sight of long-term risk rewards and should take advantage of extreme volatility by purchasing high-quality AI stocks and structured strategies.”
