The recent price weakness in Nvidia and Palantir could mean the proverbial air is coming out of the AI hype balloon. Nonetheless, traders have options if AI does experience a slowdown.
Of course, it’s hard to see AI faltering given that more companies are integrating the technology in their operations and products. However, stocks like Nvidia could see investor interest wane, However, the company recently reported better-than-expected earnings.
Muted Response?
Given AI’s serendipitous rise over the last few years, especially Nvidia, it could be that the hype was already priced into the rally. If that’s the case, any future positive momentum from strong earnings could result in a muted response.
""This stock has been dead money since June 2023, and when stocks post ‘better than expected’ results and can’t rally, it tells you that all the good news has been priced in," said Mott Capital founder Michael Kramer.
Opportunistic traders may sense that short-term price weakness is just that — only in the short term. As such, they may feel compelled to buy the dip. Traders looking for added exposure could consider the Direxion Daily NVDA Bull 2X Shares (NVDU ).
If price weakness persists, traders can also profit by taking the bearish position with the Direxion Daily NVDA Bear 1X Shares (NVDD ). Alternatively, they can pair it with their bullish positions in Nvidia as a hedge against losses.
Big data company Palantir has also been feeling the pinch as of late. That’s because its stock reached a high in mid-February, but has fallen over 30% since. The company relies on AI technology to help interpret data in its platforms. The precipitous loss in momentum might mean quick sell-offs could be a recurring theme.
“Among the top retail-traded stocks, Palantir could be the most vulnerable to a loss of retail momentum. if I were to pick a single name that could be most at risk of an unwind, PLTR would be it,” said Vanda Research SVP Marco Iachini.
2 Options to Trade Palantir
Despite the recent weakness, Palantir’s stock is far from struggling. Shares are up over 12% for the year. And big data should continue to see growth in a tech-reliant world that’s hungry for information. That said, traders can lever up their exposure to Palantir with the Direxion Daily PLTR Bull 2X Shares (PLTU). A trader with 100 shares of Palantir doesn’t need to add another 100 to get double exposure. PLTU will automatically allow a trader to double up their position with one trade.
On the other hand, if the stock price continues to trend lower, traders can take the bearish position with the Direxion Daily PLTR Bear 1X Shares (PLTD). Rather than using options to short the stock, PLTD will allow for this exposure in an ETF format. LIke NVDD, PLTD allows for flexibility in a down-trending market to give traders the ability to profit when short-term price weakness occurs.
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