The synthetic-intelligence boom has fueled the stock market over the past few years, and the hype has gone into overdrive within the last 12 to 18 months. Based on all this chatter, there are several AI stocks to look at.

Is investing in AI a great decision? Well, as of late, the costs of many AI-related stocks have skyrocketed, and so have their valuations.

Thus, investors need to look at these valuations fastidiously for overpriced AI stocks that don’t have the earnings power to match their lofty prices. When irrational exuberance kicks in, stock prices will often plummet or correct eventually.

Listed below are three AI stock listings that look overvalued immediately.

1. CrowdStrike

CrowdStrike (NASDAQ:CRWD) is a cloud-based cybersecurity company that uses AI to detect malware and intrusions across networks. It has been generating huge revenue gains, with revenue up 33% 12 months over 12 months in probably the most recent quarter that ended on April 30.

Over the past 4 quarters, CrowdStrike has been generating net income and not posting net losses, which is a great check in its development and maturity. Nonetheless, the corporate’s stock price has undergone the roof, soaring 52% already 12 months up to now and 149% over the past 12 months.

It’s comprehensible as CrowdStrike is one among the leading players within the fast-growing cybersecurity industry, but its valuation has also undergone the roof. CrowdStrike now has a ridiculously high price-to-earnings ratio of 696 and a forward P/E of 93.

The exceedingly high trailing P/E is on account of the proven fact that the corporate has just began to turn into profitable. Nonetheless, the forward P/E, which relies on future earnings, continues to be very high.

Thus, investors needs to be cautious, as that prime valuation shall be hard to sustain.

 2. AMD

Advanced Micro Devices (NASDAQ:AMD) is a semiconductor company that makes graphics processing units (GPU) for computing and gaming. AMD can also be the chief rival of NVIDIA, even though it was a bit late to the sport in developing AI chips to handle more complex tasks.

Nonetheless, the corporate rolled out some recent high-performance AI chips last 12 months, they usually have fueled its sharp rise. AMD still trails NVIDIA by a large margin, but because the second-biggest player on this burgeoning space, it has gained market share.

Last 12 months, AMD’s stock price soared 127%, and this 12 months, it has climbed about 15% YTD. Nonetheless, the corporate’s revenue growth slowed in probably the most recent quarter that ended March 31, rising just 2% 12 months over 12 months.

AMD’s net income jumped to $123 million from a $139 million net loss in the identical quarter a 12 months ago, even though it is down from $667 million within the December 2023 quarter.

With AMD’s revenue expected to climb 6% 12 months over 12 months within the June quarter, it might be hard to sustain the present P/E ratio of 232. That’s astronomically high, but its forward P/E is a bit more reasonable at 46.

As with CrowdStrike, investors needs to be watching that P/E ratio.

3. NVIDIA

NVIDIA (NASDAQ:NVDA) is a terrific company that’s the far-and-away leader in its space as a maker of AI chips for data centers and computers. Nonetheless, things are getting a bit too hot.

NVIDIA has been the most popular stock available on the market for the past two years, skyrocketing 239% in 2023 and one other 149% already this 12 months. NVIDIA shares even surged again after last week’s 10-for-one stock split.

The realm by which the corporate dominates has only just began to grow, so while NVIDIA could lose some market share, it must also proceed to ride this AI revolution in computing.

NVIDIA has massive earnings power, but still, its P/E ratio is at around 70 with a forward P/E of 46. It will not be as overpriced as the opposite two stocks on this list and has considerably more earnings power. Nonetheless, with this high price, it could see a correction.

I actually think all three of those are excellent long-term holdings, but recent investors needs to be wary of those high valuations and maybe search for opportunities to purchase lower.