AI Stocks Face Year-End Tests in Thin Trading

December 28, 2025 at 07:09 UTC

7 min read

AI stocks volatility chart with trading risk and dilution concerns in year-end market activity

Key Points

Salesforce and ServiceNow enter Monday with AI strategies under scrutiny amid light, year-end trading.
AI infrastructure names like Credo, Astera Labs, Teradyne, KLA, and Applied Materials sit near key levels after volatile weeks.
BigBear.ai’s looming vote on doubling authorized shares highlights dilution risk in smaller AI plays.
Supermicro’s AI server growth story continues to clash with execution, margin, and governance concerns.

Holiday Tape Sets the Stage for AI-Linked Stocks

Across U.S. markets, AI-focused software, hardware, and semiconductor names head into the final 2025 sessions against a backdrop of thin, post‑holiday trading and ongoing “Santa Claus rally” chatter. Reuters reported that major indexes finished Friday’s post‑Christmas session nearly unchanged on below‑average volume, with Carson Group strategist Ryan Detrick describing the market as “catching our breath” after a strong run. That environment matters for high‑beta, AI‑exposed stocks because lighter liquidity can exaggerate moves when new headlines or analyst calls hit. Several exchanges and calendars, including Nasdaq and Investopedia, show that U.S. stock markets will trade normally through New Year’s Eve and close on Jan. 1, 2026, reinforcing that the coming week is both seasonally active and structurally thin.

Salesforce: Agentforce Momentum Meets AI Reliability Questions

Salesforce (CRM) goes into Monday with shares around the mid‑$260s and investors focused on its AI agent platform, Agentforce. The company recently raised fiscal 2026 revenue and adjusted profit forecasts, citing stronger enterprise demand for AI agents and data products. Reuters reported that Agentforce and Data 360 annual recurring revenue (ARR) are nearing $1.4 billion, with Agentforce ARR alone surpassing half a billion dollars in the latest quarter. However, new reporting from India Today highlighted internal concerns about large language model reliability, citing Salesforce executives who described declining confidence in LLMs and a shift toward more deterministic automation. At the same time, ChannelE2E reported that Salesforce has expanded what partners can build and commercialize on its platforms, including custom AI agents, potentially deepening its ecosystem. Filings‑based coverage from MarketBeat pointed to mixed institutional positioning and notable insider activity, including director G. Mason Morfit’s purchase of 96,000 shares around $260.58, while also noting earlier CEO share sales. Consensus data from StockAnalysis shows a Buy rating and average price targets in the low‑$320s, but with a wide range, underscoring differing views on how quickly Salesforce can scale AI agents from pilots to broad deployments.

ServiceNow: Armis Deal and CEO Pact Drive Re‑Rating Debate

ServiceNow (NOW) closed Friday near $153.89 after a 5‑for‑1 stock split and now faces scrutiny over a 2025 deal spree totaling at least $12 billion. The centerpiece is a planned $7.75 billion cash acquisition of cyber exposure management firm Armis, which ServiceNow expects to fund with cash and debt and close in the second half of 2026, subject to approvals. Company statements frame Armis as central to building a unified security platform that links asset discovery and threat intelligence to automated workflows in an “agentic AI” era. Armis brings more than $340 million in ARR with growth above 50%, according to ServiceNow. Yet Bloomberg and MarketWatch coverage noted investor concerns about reliance on inorganic growth and deal costs. Analyst reactions have been mixed but generally positive: TD Cowen cut its target to $230 from $250 while keeping a Buy rating, and UBS trimmed its target to $200 from $230. MarketBeat and StockAnalysis data show average targets in the low‑$220s and a Moderate Buy consensus. Governance developments add another layer: an SEC‑filed amendment extends CEO Bill McDermott’s service commitment through at least 2030, signaling board support for a long‑term, acquisition‑driven strategy.

BigBear.ai: Share Authorization Vote Highlights Dilution Risk

BigBear.ai (BBAI) enters the week after a roughly 4.9% Friday decline to around $5.73 on below‑average volume, with attention shifting from contracts to capital structure. A reconvened special stockholder meeting is scheduled for Tuesday, Dec. 30, 2025, with electronic voting on a key proposal open until 11:59 p.m. ET Monday, Dec. 29. The company is asking shareholders to approve an increase in authorized common shares from 500 million to 1 billion. SEC filings state the additional shares would support financing, compensation, strategic relationships, and other corporate purposes, and the board recommends voting in favor. CEO Kevin McAleenan has said in a shareholder letter that the proposal is intended to provide flexibility rather than signal immediate issuance, but proxy materials also warn that future share sales could dilute existing holders and affect voting power and per‑share metrics. Recent commentary from MarketBeat, The Motley Fool, and TipRanks has emphasized the tension between BigBear.ai’s defense and border‑security AI narrative and concerns about revenue shrinkage, low margins, and dilution. The company’s pending $250 million acquisition of Ask Sage, a secure GenAI platform for defense agencies expected to contribute about $25 million in 2025 ARR, is another focal point as investors weigh growth potential against execution and balance‑sheet risk.

AI Infrastructure: Connectivity, Test, and Equipment Leaders Near Key Levels

Several hardware and semiconductor names tied to AI infrastructure are also at important technical and fundamental junctures. Credo Technology Group (CRDO) fell 3.6% Friday to $144.83 on about half its average volume, after a steep AI‑driven run. Its latest quarter showed revenue of $268 million, up 272% year over year, with guidance for $335–$345 million next quarter, but filings reveal heavy customer concentration, with one customer at 64% of revenue. Astera Labs (ALAB) closed at $167.26, down 1.6%, amid a wave of 13F‑based institutional headlines and a new Zacks report setting a $185 target and highlighting strong demand for its Aries, Taurus, and Scorpio connectivity products, alongside risks from customer concentration and valuation. Teradyne (TER) hovered near $199, supported by recent upgrades from Goldman Sachs and Stifel that cited robust AI‑related semiconductor test demand into 2026, while its robotics expansion adds a secondary growth leg. In equipment, KLA (KLAC) set fresh highs around $1,280 after multiple target hikes, including Jefferies and Cantor Fitzgerald at $1,500, even as some consensus averages lag the price. Applied Materials (AMAT), at about $262, sits near its 52‑week high after a 61% year‑to‑date gain, with Jefferies and TD Cowen lifting targets on expectations that AI, DRAM, and advanced packaging will drive a 2026–2027 wafer‑fab equipment upcycle, as SEMI forecasts industry sales rising to $135 billion by 2027.

Supermicro and Analog Devices: AI Tailwinds vs. Execution and Valuation

Super Micro Computer (SMCI) last traded near $30.64, well below its $66.44 52‑week high, despite reiterating ambitious fiscal 2026 net sales guidance of at least $36 billion and highlighting more than $13 billion in NVIDIA Blackwell Ultra orders. Recent company updates include a Dec. 9 announcement that new liquid‑cooled NVIDIA HGX B300 systems are ready for high‑volume shipment. Reuters has documented repeated shifts in delivery schedules and internal‑control weaknesses, and analysts tracked by MarketBeat and TipRanks show a Hold‑leaning consensus with average targets in the mid‑$40s, reflecting both AI server optimism and concerns about margin volatility and reporting reliability. Analog Devices (ADI), by contrast, sits near the top of its range at about $276.84, close to consensus targets in the high‑$280s. The company reported fiscal 2025 revenue of $11 billion and returned 96% of free cash flow to shareholders via buybacks and dividends. Guidance for fiscal Q1 2026 calls for $3.1 billion in revenue and adjusted EPS of $2.29. While Wall Street Zen recently downgraded ADI to Hold and some institutional filings show modest stake reductions, Zacks and other services still list Buy‑leaning ratings. Citi has argued that analog names, including ADI, could positively surprise in 2026 given low inventories and supply growth, and TrendForce has reported that ADI has informed customers of price increases effective Feb. 1, 2026, a factor some analysts see as supportive for margins.

Key Takeaways

Year-end thin liquidity is a common backdrop across AI software, hardware, and equipment names, increasing the impact of even modest headlines.
Salesforce and ServiceNow both rely heavily on AI narratives, but face different investor concerns: LLM reliability and ecosystem execution for Salesforce, and M&A scale and integration risk for ServiceNow.
BigBear.ai’s vote on doubling authorized shares is a near-term governance catalyst that crystallizes the trade-off between funding flexibility and dilution anxiety in smaller AI stocks.
AI infrastructure leaders such as Credo, Astera Labs, Teradyne, KLA, and Applied Materials are trading near key levels where expectations for a 2026–2027 capex upcycle are already embedded.
Supermicro and Analog Devices illustrate the split between AI beneficiaries priced for skepticism due to execution and controls, and those priced near consensus targets where valuation discipline is central.