Barclays Report: U.S. AI concept stocks have experienced a significant pullback, falling an average of 25% from their February peak, with valuation multiples decreasing by another 17% in the past month.

Barclays' latest research report, published on August 4, indicates that the share prices of the 12 AI concept stocks it has been tracking since February have, on average, fallen by approximately 25% from their respective peaks.

The report also shows that over the past month (July 6 to July 31), the implied AI valuation multiples for the entire AI portfolio decreased by an average of another 17%, equivalent to about 9 valuation multiples. During the same period, the S&P 500 index fell by 1%, and the Nasdaq 100 index fell by 5%.

Despite the pressure on the AI sector, it has still seen an average gain of approximately 60% year-to-date. Barclays analysts believe that this correction is primarily due to share prices having risen significantly before quarterly earnings reports, with actual performance not being sufficient to support further valuation expansion. However, the report also emphasizes that the fundamentals of AI businesses remain strong, and Barclays has revised its forecast for the compound annual growth rate of cloud AI revenue for AI concept stocks (2023-2027) from approximately 53% to about 65%. In contrast to the correction in AI concept stocks, non-AI company share prices rose by an average of low double-digit percentages during the same period, indicating signs of capital rotation.