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US Indices Drop Amid AI Market Moves

Plus500 | Thursday 07 December 2023

Wednesday witnessed a decline in US indices due to plummeting oil prices and weaker job market indicators. Amid this, AI stocks saw pivotal moves as C3.ai's quarterly results undershot expectations and AMD unveiled new product offerings. As markets await reactions to these latest shifts in the artificial intelligence (AI) field, these developments could shape the future of AI-focused stocks.

An image of an AI chip

American Indices’ Wednesday Drop

Some Wall Street Indices declined on Wednesday, December 6, as oil prices plummeted to levels unseen since June, signalling economic concerns. The S&P 500 (USA 500) dipped by almost 0.4%, the Dow Jones Industrial Average (USA 30) by nearly 0.2%, and the Nasdaq Composite (US-TECH 100) by about 0.6%. Wednesday revealed weaker signs in the labour market as the ADP report on private payrolls indicated only 103,000 jobs added in November, missing expectations. 

This followed Tuesday's report on job openings, sparking expectations of a Federal Reserve interest rate cut in the coming year, with markets predicting at least a 100 basis point reduction. However, there are doubts about this outlook, as some strategists caution that these predictions might be exaggerated. 

The same day, Oil (CL) prices also showed a drop of almost 4%, while Brent Oil (EB) fell by over 3.5% to a five-month low. These latest declines could be due to growing concern surrounding fuel demand as extant inventories grow larger. Amid these potentially troubling market signals, two major AI stocks saw shifts on New York’s trading floors on December 6th as well. (Source: Yahoo Finance)

C3.ai Misses Mark

On Wednesday following market close, C3.ai (AI) reported its latest quarterly results - and may have come up short in the estimation of some traders. The provider of enterprise AI software reported a fiscal second-quarter net loss of $69.8 million, slightly narrower than the previous year. Adjusted losses per share stood at 13 cents versus an expected 18-cent loss according to analysts. However, revenue fell short at $73.2 million, below the anticipated $74.3 million, leading to an 8% drop in after-market share value.

CEO Thomas Siebel highlighted increased interest in their AI products, expressing optimism for accelerated revenue growth during a transition to consumption-based pricing. The company closed 62 agreements, including 36 pilots, in contrast to 24 pilots in the previous quarter.

C3.ai emphasised positive responses to its new pricing strategy, closing over 100 pilots since its introduction. Projections for the fiscal third quarter anticipate revenue between $74 million and $78 million, slightly below the $77.7 million consensus, while forecasting $295 million to $320 million for the full fiscal year, differing from the $307.9 million consensus.

Despite an almost 160% increase in C3.ai shares throughout 2023, the latest financial results saw a decline, with revenue missing projections despite optimistic signs of product interest and a shift in pricing strategies. How traders will react to these figures over the course of the trading day Thursday remains to be seen. (Source: Market Watch)

C3AI price chart since the beginning of 2023 up until December 7

AMD Ups the Ante

Another major player in the AI sphere seems poised to expand its market position as well. On Wednesday, AMD (AMD) introduced its Ryzen 8040 Series laptop processors, aiming to elevate AI performance by up to 60% compared to previous models. Jack Huynh, an AMD executive, highlighted the processors' enhanced AI capabilities, expected to facilitate more extensive AI applications.

The Ryzen 8040 chips will feature in computers from major brands like Dell (DELL), HP (HPQ), and others that are set to hit markets in early 2024. In addition, AMD released its Instinct MI300X accelerators, targeting data centres and servers, positioning them as competitors to Nvidia's (NVDA) AI chips. 

AMD claims its MI300X outperforms Nvidia's H100 HGX by up to 60% in specific AI model inference tasks. Meta plans to employ MI300X in its data centres for AI model inferencing.

Victor Peng, AMD's president, emphasised the MI300 Series' advanced technology, promising superior performance and expecting extensive deployment in cloud and enterprise setups.

During their earnings call in October, AMD CEO Lisa Su projected data centre GPU revenue of around $400 million in the fourth quarter, with expectations to exceed $2 billion by 2024. AMD's strategic moves in AI chip development and their roadmap for data centre GPU products indicate strong confidence in their future market positioning and revenue growth within the AI and data centre sectors. So far this year, AMD shares have risen by 80% in value, but it is as yet unknown whether this momentum can be sustained as we close out 2023.

AMD price chart since the beginning of 2023 up until December 7

Conclusion

Markets the world over can be difficult to predict, and with AI being a relatively new market sector, the future trajectory of associated shares is as yet opaque. Traders will have to wait and see how the interaction of various economic factors plays out on Wall Street’s trading floors.


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