The glitz and glam of the AI revolution have investors rushing to stake their claim in a potential trillion-dollar industry in the near future.
However, the sobering thought of AI stocks to sell might give pause to the zealous. This year has seen AI soar as the investment darling, especially with rapid chatbots and image generation advancements. Yet, amidst the digital euphoria, many AI stocks are now inflated, teetering precariously on overvaluation. With the tech giants entering the AI arena with deep pockets, the competition is likely to crumble under pressure.
Prudent investors would be wise to discern that digital gold is not all that shines in the tech world. Hence, it is imperative to tread cautiously and consider avoiding AI stock crashes by reconsidering some risky AI investments. It may be time to sell these AI stocks before they lose their luster.
C3.ai (AI)
C3.ai (NYSE:AI) has established its position in the buzzing world of enterprise AI software, capturing the attention of forward-thinking investors. Boasting a roster of top-tier clients from the government, industrial, and energy sectors, one might wonder if the firm is poised to deliver for its investors over the long haul.
A whopping 30% of its sales are linked to a joint venture with energy behemoth Baker Hughes. Alarmingly, this lucrative contract has its days numbered, set to elapse within the next couple of years. Moreover, the firm has transitioned its fee structure, shifting from a subscription-based to a usage-based model. This change will likely dent the company’s near-term revenue stream, destabilizing its financial bedrock. On top of that, growing competition from leading cloud infrastructure platforms offers similar services.
Layer that up with its current unprofitable status, and you’ve got a recipe for caution. Investors are doling out a premium for this stock, but it’s essential to weigh in the associated risks.
Snap (SNAP)
During the pandemic years, Snap (NYSE:SNAP) rode the wave of stay-at-home mandates, cementing its spot in the digital limelight. However, as the dust settled, this ephemeral messaging platform began losing its luster. Once-loyal advertisers began diverting their marketing investments to burgeoning platforms such as TikTok.
Snapchat’s recent financials have painted a rather gloomy picture. Its Q2 2023 report showed an adjusted net loss of $377 million, while its free cash flow shrunk, settling at $119 million, down from $147 million the previous year. With the magnetic allure of TikTok’s robust millennial user base and Instagram’s evolving toolkit for advertisers, Snapchat finds itself at a crossroads. Its future outlook is riddled with both fierce competition and financial challenges.
Symbotic Incorporated (SYM)
Warehouse robotics has emerged as an emerging investment option for long-term investors, radically transforming the operational efficiencies of industry giants. Symbotic Incorporated’s (NASDAQ:SYM) AI-driven robots are truly stealing the spotlight. The company has the potential to become a market sensation as its powerful state-of-the-art machines increasingly integrate into more warehouses.
Going public through a SPAC in 2022, its recent financials have been impressive, posting sales of $311.8 million in the last quarter, a staggering 77.6% growth from the previous year. The company proudly shares that future contracts with retailers and logistics partners account for billions in potential sales. Hence, it’s safe to say the buzz around Symbotic stock isn’t just noise.
However, the stock might not be ripe for picking just yet. With it trading over 32 times trailing twelve-month cash flows and its piling operational losses, including a net loss of $39 million in the last quarter, one should exercise caution.
On the date of publication, Muslim Farooque 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