3 Tech Stocks That Could Be in Trouble if There's an Artificial Intelligence (AI) Slowdown

Anthropic CEO Dario Amodei recently urged artificial intelligence (AI) companies to slow their development due to concerns about potential misuse and the dangers that rapid development could pose to society.

Slowing down AI is not something many investors may have expected to hear from a top AI company that's planning to go public in the near future. If that ends up happening, however, many stocks could be in deep trouble, including Nvidia (NASDAQ:NVDA), Micron Technology (NASDAQ:MU) (NASDAQ:AMD), and Palantir Technologies (NASDAQ:PLTR). Here's why these tech stocks could be particularly vulnerable amid an AI slowdown.

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Nvidia

Leading chipmaker Nvidia has a lofty $5.5 trillion market cap. It's been experiencing tremendous growth due to AI, and companies are constantly in need of its cutting-edge chips. But if there's a slowdown in AI development, its growth rate could slow drastically, analysts will revise their estimates for its future earnings, and the stock could suddenly look far more expensive.

Currently, Nvidia's stock doesn't seem all that expensive as it's trading at a forward price-to-earnings (P/E) multiple of just under 25. That's based on the earnings that analysts expect from the company in the year ahead. It's not a whole lot higher than the S&P 500 average of 20. It may seem incredible that a company this highly valued doesn't appear overpriced, but that also depends significantly on the assumption of its future growth prospects remaining incredibly strong. That, however, could change if there's a slowdown in AI development.

For now, Nvidia's stock is in solid shape, but this is a risk that investors should be aware of, as sky-high expectations are priced into its valuation.

Micron Technology

A stock that looks even cheaper than Nvidia, based on expectations, is Micron. It's trading at an incredibly low forward P/E of seven. At that low a multiple, investors might expect something drastically wrong with the business for the stock not to be trading higher.

There isn't anything fundamentally wrong with Micron; in fact, it's been experiencing tremendous growth on both the top and bottom lines due to a shortage of memory products. But that could quickly end if AI development slows. That would lead to a trickle-down effect, with companies needing fewer chips and related AI infrastructure. The shortage of memory products could quickly turn into a glut. And if that were to happen, Micron's stock, which has surged more than 550% in the past 12 months, could be vulnerable to a significant sell-off.

Much of the excitement around Micron these days continues to be that the memory shortage won't be ending anytime soon due to strong AI-related demand, but if that isn't the case anymore, the growth story unravels, and the stock could enter a deep tailspin.

Palantir Technologies

One stock that isn't cheap is Palantir Technologies. Investors have been paying a premium for the stock for some time, given its incredible growth, with CEO Alex Karp often boasting of the company's incredible prospects and insatiable demand for its AI.

If companies scale back on AI spending, then Palantir may also show cracks in its growth rate. Its strong relationship with the U.S. government should insulate it to some degree, but the problem is that with the stock trading at a forward P/E of 85, any signs of weakness could derail the stock, as it's priced for perfection, and anything short of that would be terrible news for its shareholders.

The AI stock has been surging in recent weeks, but earlier this year, it was down big as the market appeared to be growing concerned with its steep valuation. And that could once again be a concern if the company's growth rate slows.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.