AI’s Economic Impact: Are Top Tech Stocks Signaling Caution?

About 30 years ago, the internet transformed how businesses grow. Today, companies can reach customers worldwide just with a click. This shift has significantly contributed to the growth of American businesses over the years.

However, Wall Street has been anticipating a new trend to match the internet’s impact. While several technologies have emerged since the mid-1990s, none have made a comparable mark—until now.

Image source: Getty Images.

The emergence of artificial intelligence (AI) has generated excitement among professional and everyday investors. This technology’s ability to improve its skills and functionalities with minimal human intervention makes it useful across various industries globally.

A notable prediction about AI’s impact comes from “Sizing the Prize,” a report by PwC. It suggests that AI could add $15.7 trillion to the global economy by 2030, improving both productivity and consumption.

Despite the optimism about AI’s future, there seems to be hesitation among Wall Street’s leading companies in this arena.

Nvidia, Broadcom, and AMD: A Look at Their Stock Performance

Reviewing the stock performance of key AI companies reveals significant gains. Nvidia (NASDAQ: NVDA) has seen its market cap increase by over $3 trillion since early 2023. Broadcom (NASDAQ: AVGO) and Advanced Micro Devices (NASDAQ: AMD) have also experienced remarkable increases of 216% and 141% over the past 21 months, respectively, all thanks to the AI momentum.

Nvidia’s GPUs are at the forefront of AI developments, acting as the brain behind rapid decisions in AI-driven data centers. For example, demand for Nvidia’s H100 GPU, known as the “Hopper,” has soared, allowing the company to charge premium prices—between 100% to 300% above competitors. This success has also significantly improved Nvidia’s profit margins.

Although AMD entered the AI space later than Nvidia, it is still experiencing a strong demand for its more affordable MI300X AI GPUs. With Nvidia’s products backlogged, AMD is well-positioned to capture market share.

Recently, AMD introduced its next-gen AI GPU, the Instinct MI325X, which competes directly with Nvidia’s upcoming Blackwell GPU. AMD plans to start production shortly, minimizing Nvidia’s lead time.

Meanwhile, Broadcom is a strong player in AI networking solutions. Although the company is known for various products, including wireless chips, its Jericho3-AI fabric is essential for enhancing AI GPU performance in data centers. Most of Broadcom’s growth is currently linked to its AI offerings.

While it seems nothing is slowing down these companies, a closer look at their insider transactions raises some concerns.

Image source: Getty Images.

Insider Trading Patterns Indicate Hesitation Among AI Leaders

According to statements from Nvidia CEO Jensen Huang, Broadcom CEO Hock Tan, and AMD CEO Lisu Su, the demand for AI products appears strong, supported by their companies’ growth rates. However, the insider trading activities suggest a notable lack of confidence among these top firms.

Insiders, including executives and board members, must report stock transactions to the Securities and Exchange Commission using Form 4. Data from the past year (from October 17, 2023, to October 16, 2024) shows a troubling trend of insider selling across these companies:

• Nvidia: 83 insider sales (25 from Jensen Huang) and 0 insider purchases
• Broadcom: 32 insider sales (eight from Hock Tan) and 0 insider purchases
• AMD: 23 insider sales (eight from Lisu Su) and 0 insider purchases

In total, there were 138 insider sales and no purchases from any insider at these companies over the past year. While there are various reasons for selling stock—like covering taxes from share-based compensation—the lack of buying indicates a significant gap in belief regarding their companies’ futures.

Insider buying typically signals confidence in a company’s prospects. It has been 13 months since Broadcom’s last insider buy, 46 months for Nvidia, and over five years for AMD. As the saying goes, actions speak louder than words.

If Nvidia, Broadcom, and AMD’s insiders aren’t willing to invest in their companies, should retail investors consider purchasing their stocks?

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Sean Williams has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.