Yahoo Finance·2025-12-20 17:05Core Insights - The AI trade has shown signs of stagnation since late 2025, with stocks like Nvidia and Microsoft experiencing flat or declining performance despite strong revenue growth in the sector [1][2][4] - Investors are becoming skeptical of the growth-at-any-cost mentality among AI startups, prompting questions about the timing for potential investments in AI stocks for 2026 [2] Group 1: Company Performance - Nvidia's revenue grew 62% year over year to $57 billion, with net income increasing 65% to $31.9 billion [4] - Microsoft's revenue rose 18%, with operating income growing by 24% [4] - Despite strong earnings, Nvidia has a price-to-earnings (P/E) ratio of 44, while Microsoft's is 34, indicating high expectations for future growth [6] Group 2: Market Dynamics - AI companies are heavily investing in Nvidia's advanced computer chips, with OpenAI leading in AI spending commitments in the hundreds of billions [5] - The AI sector is experiencing a potential supply glut due to booming spending, which has historically affected the computer chip industry and other infrastructure sectors [7] Group 3: Investment Considerations - Stocks like Nvidia and Microsoft have faced valuation declines, while other AI stocks, such as Amazon, appear cheaper at current prices [8][10] - Amazon's P/E ratio is 31, suggesting a lower valuation based on trailing earnings compared to Nvidia and Microsoft [10]