The stock market’s AI boom that kicked off last year still continues, although other market sectors are now trending higher as well. Investors in the AI space may be taking a much-needed breather.
One big reason to take a break is that many AI-related names still haven’t seen their earnings grow yet. For instance, many semiconductor companies are still retooling or building facilities for new AI-powered chips. But they’re not ready yet.
Those big costs can be seen with a company like
Intel (INTC).
The chipmaker reported a $7 billion loss from its foundry business. Intel is retooling to make a new generation of chips, and will likely take some time to profit from the AI trade.
While the announcement of the loss sent shares down nearly 7%, shares are still up nearly 30% in the past year.
Action to take: Long-term investors may want to build a partial stake in Intel here, as shares look oversold in the short-term. It may take some time to play out, but Intel can improve its earnings in time.
Plus, at current prices, Intel pays a 1.1% dividend.
For traders, shares are trending lower in the short-term.
The June $35 puts, last trading for about $0.70, can still see mid-double-digit returns on a further move lower in the coming weeks. Once the downtrend ends, traders may want to look for call options to buy a rebound.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.