AI stocks may be rebounding following last month’s correction, but there’s still a chance the market will be far-reaching, so keep an eye out for the top AI stocks to avoid. First, amid a broader economic downturn, more speculative artificial intelligence movements are likely to take a big hit.
If market turmoil forces investors to seek safer harbor, they’re likely to flee these risky stocks en masse. Not only that, but even some of the established companies that are capitalizing on the generative AI trend could face significant disruption if the market turns bearish again.
In other words, it’s a high-quality AI stock that has become very expensive due to investors’ perception of future growth. If market or economic uncertainty returns, these stocks could experience moderate to high declines.
Below are seven artificial intelligence plays you should consider AI stocks to avoid right now. Each fits into one of these categories.
C3.ai (AI)
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So far in 2024. C3.ai (New York Stock Exchange:A.I.) continues to decline. The enterprise artificial intelligence software company’s stock initially appeared to be in rebound mode following its February quarterly earnings release.
However, better-than-expected results and upbeat comments from CEO Tom Siebel spurred a post-earnings short squeeze rally, but AI stocks have since pared those gains and some. was repulsed. As if that weren’t bad enough, C3.ai, currently at $23 per share, could be at risk of falling further toward its pre-AI boom price of around $10 per share.
why? The last earnings release came during a wave of AI mania, leading to an overreaction to better-than-feared news. Following the earnings release, scheduled for May 29th, the market will become more nervous, with focus on the downside of C3.ai’s story, including continued operating losses and an uncertain path to profitability. There is a possibility that it will hit.
Advanced Micro Devices (AMD)
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At first you may think it’s strange for me to call you. Advanced Micro Devices (NASDAQ:AMD) One of the AI stocks to avoid. But even though the stock has fallen more than 35% since March, more downside could be in store. Blame it on emotional changes.
There was a lot of anticipation and hype earlier this year as sales of AMD’s MI300 Instinct AI accelerator chip easily exceeded the company’s own sales forecasts. But now, little of this hope and hype remains. In AMD’s latest earnings call, the company reported results and guidance in line with expectations, but investors reacted negatively to the company’s latest MI300 sales forecast.
Recall that external forecasts were calling for sales of up to $8 billion, while increasing sales from $3.5 billion to $4 billion. There is a possibility that the bullish stance on AMD stock will rebound once the rollout of AI-PC chips gets into full swing, but let’s hold off for now.
BigBear.ai Holdings (BBAI)
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BigBear.ai Holdings (New York Stock Exchange:BBAI) is a prime example of a riskier, more speculative AI stock that should be avoided with a capital “A” in the current market environment. Since the generational AI boom began in late 2022 and early 2023, the provider of AI-powered decision intelligence solutions’ stock has experienced meme frenzy at various times.
The latest of these frenzy occurred in early March, when market enthusiasm for AI stocks was at its peak. Since then, BBAI stock has seen a significant decline from then to now as investors have become increasingly cautious about AI investing trends.
However, although the stock is trading at less than one-third of its high in early March, downside risks remain large as the financial situation continues to deteriorate.as Investor Place Revenue reported on May 2 that BigBear.ai’s revenue last quarter was significantly lower than expected, and the company reported a significantly higher loss.
Beam imaging (BMR)
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Similar to BigBear.ai, beam imaging (NASDAQ:BMR) is one speculative AI stock to avoid at all costs. Indeed, this AI-powered video optimization technology company seems to be on a roll.Notice of collaboration with Nvidia (NASDAQ:NVDA) helped boost its “rising star of AI” reputation.
But while this Nvidia news may have sent BMR stock soaring from around $2 per share to as much as $34.94, it has since fallen to $6 per share. Further setbacks may occur in the future. The company is still years away from generating significant profits, much less achieving profitability.
Accordingly, Beamr Imaging will likely rely on dilutive sources of financing to sustain its operations. The company filed a prospectus in March to sell up to $250 million in stock and warrants. This is many times higher than BMR’s current market cap of approximately $87.7 million.
Intel (INTC)
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on paper, intel (NASDAQ:INTC), looks like a very promising turnaround thanks to two major catalysts that could theoretically lead to a massive resurgence for chipmakers. First, it’s a big bet by the company to become a major chip foundry.
Second, Intel’s efforts to profit from the AI chip boom. But even though the catalyst is in place, the question is when will it be fully unleashed? As I pointed out in his recent INTC stock article, Intel CEO Pat Gelsinger says the foundry may not be profitable until 2030.
For now, any success with AI chips may not be enough to counter foundry losses. Even if it succeeds in its AI chip efforts, it may not be enough to counter further foundry problems. As I’ve argued before, stay away from Intel, at least until the stock is much cheaper, which currently trades in the low $20s.
Lemonade (LMND)
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When it was listed in 2020, lemonade (New York Stock Exchange:LMND) has the potential to “disrupt” the insurance industry by using AI to reduce claim losses and automate customer service, surprising the market.
LMND stock ultimately crashed and burned due to poor earnings and a bear market in 2022, but the stock has rebounded 62.6% over the past year. The better-than-expected results in recent quarters, including last quarter, are not being driven by AI enthusiasts.
But even though the numbers are improving, this is still one of the AI stocks to avoid. Although insurtech companies are outperforming expectations to some extent, losses are still expected to remain high through the remainder of 2024 and into 2025. Sentiment could deteriorate if the company fails or fails to achieve revenue and profitability improvements in the quarter. LMND causes a reversal of this partial recovery.
Veriton (VERI)
Despite the blossoming of AI growth trends in 2023 and 2024; Veritone (NASDAQ:Berry) plummeted in 2021 and 2022 and continued to fall like a stone. This is not surprising given the poor performance of AI computing solutions companies.
However, VERI stock experienced a brief resurgence in March and April. Veritone soared from less than $2 per share to up to $7.76 per share. We’re not sure, but given Veritone’s elevated short interest at the time (nearly 20% of its float), this could be due to a short squeeze.
Since then, VERI’s stock price has fallen to around $3.25 per share.based on In search of alpha Commentator Michael Wiggins de Oliveira has a pessimistic view of the stock, and there is no need to expect a recovery. De Oliveira said Veritone has struggled to achieve consistent revenue growth. There are also risks such as customer concentration. With this in mind, there is little reason to “buy the edge” here.
On the date of publication, Thomas Neal did not have (directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer and are influenced by InvestorPlace.com. Publishing guidelines.
