Artificial intelligence-related services provider BigBear.ai (NASDAQ:BBAI) saw its share price skyrocket on Tuesday on apparently no company-related news. Sector peers, including C3.ai (NYSE:AI) and SoundHound AI (NASDAQ:SOUN), also enjoyed robust rallies, suggesting a link to broader AI enthusiasm. Specific to BBAI stock, it frequently sees dynamic trading which may be invigorating the bulls.
Without any clear company-related catalyst, BigBear.ai — which covers a broad range of services ranging from consultation to big data analytics to cybersecurity — appears to have latched onto the dramatic success of Nvidia (NASDAQ:NVDA). Last week, all eyes were on the technology juggernaut prior to management releasing its latest earnings print.
Nvidia didn’t disappoint. According to CNBC, the company exceeded expectations for per-share profitability and revenue. In terms of revenue, the top line surged 265% higher than the year-ago quarter. Primarily, the catalyst stemmed from strong sales of AI chips for servers.
Further, with NVDA marching closer to the $2 trillion market capitalization milestone, the rising tide has lifted all boats. For BBAI stock, the mainstream attention regarding digital intelligence should enable the underlying enterprise to market its AI solutions effectively.
Bulls and Bears Clash Over BBAI Stock
Fundamentally, BBAI stock and its peers enjoy a massive total addressable market. According to MarketsandMarkets, the global AI sector reached a valuation of $150.2 billion last year. Further, analysts anticipate that the space will expand at a compound annual growth rate (CAGR) of 36.8% by 2030. At the forecast’s culmination point, sector revenue should reach approximately $1.35 billion.
However, not everyone is enthused about the surge in names like BBAI stock, with some experts warning about a possible AI bubble. What’s particularly worrisome is that few recognize the bubble until it’s too late. Recent examples include the dot-com crash and the implosion of the electric vehicle industry.
It’s also helpful to point out the broader context. While BBAI stock stormed higher on Tuesday, it’s only up about 5% in the past 52 weeks. Also, since its public market debut, shares are down about 66%, which is far less flattering.
Given this context, it’s not surprising that the bears have targeted BBAI stock. Of note, its short interest stands at nearly 18% of its float. In the options market, several traders have sold high volumes of near-expiry call options at the $3 strike price. At face value, these trades represent wagers that BBAI will not rise above $3 prior to expiration.
This pessimistic trade is no longer profitable and the subsequent covering action may be creating a positive feedback loop.
Why It Matters
Within the past three months, no analyst has covered BBAI stock. However, the most recent ratings materialized on Nov. 8 of last year, breaking down as two buys and two holds. The most optimistic expert sees a price target of $4.50.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
