Forget the Santa Claus Rally -- Artificial Intelligence Stocks Like Broadcom, Amazon, and Rivian Dragged the Stock Market Down Today

It’s a bad day for tech, so bad that the stocks of Broadcom, Amazon, and Rivian are sliding, dragging the broader market down with them. How often does that happen? More often than you think. With the S&P 500 down another 1.5% on Tuesday, it’s not a surprise to see AI stocks falling. Broadcom (AVGO), down 2.5%, is leading the group lower after reporting disappointing earnings, while Amazon.com (AMZN), off 2%, continues its post-earnings slide. Rivian Automotive (RIVN) shares have dropped 3% ahead of its own release after Tuesday’s close, while other AI stocks like Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL), have each dropped more than 1%.



Still, the businesses of those companies are different enough that you’d expect a little difference in performance. Broadcom, after all, makes chips for AI applications; Amazon sells stuff and has a big cloud business; Rivian makes electric vehicles; Nvidia makes chips; Microsoft does a lot of everything, including the cloud; and Alphabet is driven by its Google search business, as well as its growth in the cloud. Yet they move in tandem quite often. Since Amazon went public in 1997, all seven stocks have fallen on the same day 1,234 times out of 5,432 trading days with at least one decliner, according to Dow Jones Market Data, or 23% of the times, by far the largest number of occurrences of the seven possibilities.



What’s more, the number of days where just one of the stocks falls while the rest rise is particularly small—just 231 occurrences, or 4.2% of the times. Don’t expect the AI stock pain to end just yet. Mizuho analyst Jordan Klein notes that right now it feels “like [the] glass [is] totally empty as folks sell first [and] ask questions later. What’s more, and the seven stocks dropping together back this up, he notes that it “feels like [there’s] nowhere to hide right now in AI as investors care little on any good news and focus on the bad, selling pretty much any and everything that just days prior they loved.”



Only one thing, Klein notes, can reverse the selling now— Amazon’s earnings, particularly what it says about its cloud business. “AMZN and their AWS guide COULD NOT BE MORE IMPORTANT POST CLOSE FOR NEXT MOVE IN AI in my view,” he writes. “A TON riding on whether they see stabilizing AWS growth around 11% or a change up or down.” No matter the conclusion, don’t be surprised if all seven stocks take their cue from it.

In the meantime, investors looking for opportunities in the AI sector might want to consider smaller-cap stocks that have shown strong growth and momentum. For instance, the list of top AI stocks by market cap includes several smaller-cap companies like Twilio (TWLO), UiPath (PATH), and Upstart Holdings (UPST), which have shown strong growth and momentum. These stocks might be better positioned to take advantage of the growing demand for AI technologies, while larger-cap stocks like Broadcom, Amazon, and Rivian may face more headwinds in the current market environment.

In conclusion, the recent slide in AI stocks like Broadcom, Amazon, and Rivian is a reminder that even the most promising sectors can face headwinds in the broader market. Investors looking for opportunities in AI should consider a diversified approach, including smaller-cap stocks that have shown strong growth and momentum. As always, it’s important to do your own research and consider your risk tolerance before making any investment decisions.