Is AI Mania Waning? 3 Stocks to Sell Now.
If you’re wondering about which AI stocks to sell, look no further. With AI chatbots first going viral in 2023 many analysts have started questioning the hype cycle around AI. While generative AI has proven to shorten workflows around coding and stock imagery, price corrections could be on the way. There are certainly some negative characteristics of the technology that are often overlooked when discussing its potential.
Moreover, the technology is in its nascent stages, which means ever changing government regulation around its use and application. As such, there are several companies which have seen their stocks boom due to their commitments to the AI sector. However, they may be at risk of losing value should the climate around AI change.
For investors, wondering which AI stocks to sell, a few indicators at the moment could help avoid substantial losses. Here are three such stocks that investors should consider selling in case AI turns out to not be all it’s cracked out to be.
AI Stocks to Sell: Snap Inc. (SNAP)
With two failed attempts at AI products via the Snapchat app, Snap Inc. (NASDAQ:SNAP) certainly looks like a sell. The company’s attempt to directly integrate a permanent AI chatbot into its product left many users alienated.
Its second AI product allowed users to upload their saved photos from the app and be turned into AI art. This also proved incredibly unpopular due to creepy results and high costs. As a feature, it did not add any value to the app, and as such did not significantly drive revenue.
Alongside these AI products, Snap’s attempt to offer a premium version of Snapchat has not led to exceptional growth. Again, this came from the features added not particularly being useful either. These factors, along with the significant losses Snap saw in 2023 make it one of the AI stocks to sell.
C3.ai (AI)
Despite being up around 6% in the last six months, C3.ai (NYSE:AI) stands among AI stocks to sell right now. This prediction comes from the fact that the company has already seen one price correction in the last year, despite a relatively strong stock market. Should the U.S. economy enter a recession, C3.AI stock could suffer significantly due to its lack of established products and customers.
Furthermore, the company currently operates 86% of its services as a subscription-based model. This means in times of economic hardship, companies that subscribe to C3.AI enterprise services may search for cheaper alternatives. Ultimately, they could cut subscriptions altogether in order to save money.
With the company’s EBITDA ballooning from $52 million to $277 million in just two years, C3.AI appears financially uneasy. Should cash become expensive again, C3.AI could see its stock value plummet.
Baidu Inc. (BIDU)
With its significant downtrend of 22% in the last six months, Baidu Inc. (NASDAQ:BIDU) stock currently seems like a sell. Even more concerning, all signs point towards a significant recession of the Chinese economy. This comes as house prices decline in China and domestic investing in the country dwindles.
For investors holding Chinese stocks across the board, a Chinese recession would be a reason to sell. However, Baidu is especially risky in the case of a recession, since the company has been struggling with overvaluation. Another issue for Baidu comes from its relatively limited market opportunities, considering the nature of the Chinese internet. Due to the heavy restrictions from the communist party, Baidu will struggle to expand its actual offerings anywhere outside of China.
Thus with this restricted market and significant government control, Baidu stock price remains directly tied to the Chinese economy. For these reasons Baidu should be considered among the AI stocks to sell for 2024.
On the date of publication, Viktor Zarev 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.
