The Invesco QQQ Trust ETF (NASDAQ:QQQ), a fund largely composed of tech stocks, has soared 45% over the past year. And in some specific semiconductor and AI-related names, the gains have been parabolic. Super Micro Computer (NASDAQ:SMCI) has rocketed more than 1,000% over the past 12 months, to give one example.
While the gains have been extraordinary, there’s no guarantee that the good times will keep on rolling. For one thing, the Federal Reserve may back away from its plans to cut interest rates given a recent string of hot inflation readings. And for another, while AI is a technology with extraordinary promise, it is far less certain how the proliferation of AI tools will impact corporate earnings.
Particularly within the tech stock space, there are some companies that have seen shares run-up with the AI wave but which may not actually see their businesses improve in the months and years to come. With valuations at lofty levels, it’s time to sell these tech stocks before the inevitable correction arrives.
Autodesk (ADSK)
Autodesk (NASDAQ:ADSK) finds itself in an interesting place, as it pertains to artificial intelligence. The graphics software company could find itself benefitting if AI enables faster workflows and broadens the addressable marketplace for its services.
On the other hand, artificial intelligence could cause many of Autodesk’s current customers to abandon Autodesk’s solutions entirely and outsource everything to AI.
This risk came to a head last week when another graphics software firm, Adobe (NASDAQ:ADBE) saw shares fall 14% following a soft earnings report. Adobe already dipped in February following the debut of OpenAI’s Sora text-to-video generator. And Adobe’s underwhelming earnings report added to the concerns that AI could be a Trojan horse for the graphics software space.
Turning to Autodesk, its shares have rallied 30% over the past year, in part due to hopes that AI will add to its bottom line. But, like Adobe, it faces the risk that nimble competitors will be able to use bespoke AI tools to whittle away at chunks of Autodesk’s core design and digital prototyping market. With Autodesk selling at 32 times estimated fiscal year 2025 earnings, there is little room for error here if anything goes wrong for Autodesk on a business execution standpoint.
Marvell Technologies (MRVL)
Marvell Technologies (NASDAQ:MRVL) is a semiconductor company which is involved in a number of different chip businesses. It focuses on System-on-a-Chip architectures along with Ethernet solutions, electro-optical products and custom application specific integrated circuits among others.
While Marvell is broadly diversified across chip types, its AI product offerings have garnered most of the attention in recent months. Marvell makes a point of highlighting its partnership with Nvidia (NASDAQ:NVDA) and its focus on delivering AI infrastructure for the AI Era.
Shares of MRVL stock soared over the past year thanks to the hopes that Marvell’s AI positioning would lead to robust profit growth. Alas, it wasn’t to be.
Marvell’s recent Q4 results were a huge disappointment. The company grew revenues just 1% year-over-year. Making matters worse, Marvell reported a net loss for the quarter. And the weakness is expected to continue into fiscal year 2025; the company offered Q1 guidance far below Wall Street estimates and noted that its gross margin may fall sequentially. For all the hype around AI growth, for companies such as Marvell, it hasn’t translated into meaningful results on the bottom line.
Airship AI Holdings (AISP)
Airship AI Holdings (NASDAQ:AISP) offers a software platform for video, sensor, and data management surveillance focused on law enforcement and crime prevention solutions. With the focus on artificial intelligence, traders have taken an interest in AISP stock; shares have leapt fivefold in the month of March.
To put more context on that, Airship AI came public via a SPAC with BYTE Acquistion. Shares dropped from the initial $10 offering price down to less than $2, as the business didn’t appear to be showing much initial momentum.
Even based on the firm’s SPAC investor presentation, it looked like revenues were only growing around 10-15% per year and the company was projected to generate just $14.5 million in revenues in 2022.
Shares are rocketing lately on a series of new project announcements. However, without much tangible in the way of revenues or profits, it’s hard to forecast how much these contracts really add to the bottom line.
In any case, Airship AI has been in business since 2006 and is still generating quite limited revenues after 18 years. I’m highly skeptical that the current AI wave will suddenly turn this struggling software firm’s fortunes around. With the stock up fivefold virtually overnight, traders should head to the exits.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.