Overlooked Alpha

Overlooked Alpha

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Overlooked Alpha
Overlooked Alpha
This AI Stock Has Big Problems Ahead
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This AI Stock Has Big Problems Ahead

Enthusiasm for AI has given this company a boost. But a rising tide can't lift a leaky boat.

Joe | 3MB
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Overlooked Alpha
Jun 25, 2023
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Overlooked Alpha
Overlooked Alpha
This AI Stock Has Big Problems Ahead
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Highlights:

  • Following a massive guidance cut in February, the stock fell 60%. It then rallied back amid optimism towards artificial intelligence.

  • But that optimism ignores a key risk: the guidance cut was not driven by timing of demand, but a technological shift away from its core product. Microsoft, a key customer, dramatically cut spending.

  • Even if that risk doesn’t play out, the business has valuation concerns at 15x sales. And AI euphoria appears to be fading.

  • This is a short with multiple ways to win, and the potential for impressive near-term returns.

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