Stocks Tied to Artificial Intelligence Trading at a Premium, Says JPMorgan

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JPMorgan analyst Samik Chatterjee notes that stocks tied to the artificial intelligence frenzy are trading at a premium compared to their historical trading average. Despite this, the stocks are still attractive and have been propelled to new heights by the AI trend. The underperformance of Tesla and Apple suggests that companies will need to prove they have a fundamental AI story rather than just riding the wave of Big Tech names.

Stocks tied to the artificial intelligence frenzy might be trading at a premium, but that doesn't mean they're unattractive, according to JPMorgan. The AI trend has propelled stocks to new heights. This year alone, the two highest outperformers in the Magnificent Seven cohort — Nvidia and Meta Platforms — have climbed 90% and 44%, respectively.

On the other hand, the underperformance of Tesla and Apple , each down 31% and 10%, also speaks volumes: The days of merely riding the wave of these Big Tech names seem to be over, and companies will have to start proving that they have a fundamental AI story. Indeed, JPMorgan analyst Samik Chatterjee noted that within the hardware and networking space, the "AI Group" of stocks is trading at a 60% premium compared to its historical trading average. For comparison, the non-AI group of stocks is only at a 10% premium. Overall, Chatterjee said that the AI cohort is trading at a 55% premium relative to the non-AI basket

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