This week’s turbulence in technology and AI-related stocks has created a wave of buying opportunities, as indicated by a technical metric widely used by investors. Major U.S. stock indexes experienced their steepest declines in over a month on Thursday, primarily driven by a rotation away from high-flying technology companies. This trend highlighted concerns regarding the inflated valuations linked to the AI sector. Although the Nasdaq Composite staged a partial recovery on Friday, it still reflected a notable decline of 3.5% in November.
Employing the CNBC Pro stock screener, analysts identified stocks within the S&P 500 that experienced significant pressure over the past week, specifically those whose 14-day relative strength index (RSI) has dipped below the threshold of 30, categorizing them as oversold—an indication that a rebound could be forthcoming.
Among the most impacted stocks is Oracle, a leading provider of database management software and cloud infrastructure services. Its RSI rested at a mere 24, indicating that it is among the most oversold stocks currently on the market. Oracle’s share prices fell nearly 6% this week, marking a 35% decline since hitting a high on September 10. Concerns have been mounting about the company’s reliance on debt markets to finance its AI infrastructure projects. Following the negative sentiment surrounding Oracle, Bank of America recently reinstated credit coverage of Oracle’s debt at a market weight and emphasized the need for a clarified financial policy in its capital-intensive operations. Analyst Tom Curcuruto noted that while Oracle’s growth catalysts exist, they are counterbalanced by credit risks such as competitive pressures in AI, capital expenditure uncertainties, and negative free cash flow.
Another stock that caught the oversold classification is Super Micro Computer, a chipmaker, which has an RSI below 27. The company has faced significant headwinds, with its stock losing 30% just in November and down 45% since its peak in February. Slower gross profit margins and disappointing fiscal first-quarter results have weighed heavily on market sentiment. While analysts show mixed ratings for Super Micro, the consensus price target among 20 analysts suggests a potential upside of nearly 23%. Among this group, two analysts have rated it a strong buy, seven a buy, and eight a hold.
Lamb Weston, another notable mention, specializes in frozen potato products and is currently the most oversold stock, with an RSI below 29. The stock has dropped 11% in the past month and 32% since reaching a 52-week high last December, primarily driven by a downturn in consumer demand. Nonetheless, analysts anticipates that Lamb Weston could see an increase of around 17% over the upcoming year, bolstered by cost-cutting measures and better-than-expected adjusted earnings and revenue in its fiscal first quarter.
Additionally, other stocks that fell into the oversold category this week included Molina Healthcare and Charter Communications, suggesting a broader market movement that might indicate further potential rebounds in these names.
