U.S. equities continue their rally, defying all odds. The S&P 500 has climbed 13.9% since the start of the year, while the tech-heavy Nasdaq Composite soared 17.3%. Well-known artificial intelligence (AI) behemoths, particularly Nvidia (NASDAQ:NVDA), are responsible for much of the gains. Moreover, last week turned out to be great from a macroeconomic perspective. The May consumer price index (CPI) report came in lower than most economists had forecasted, and wholesale prices, which are measured via the producer price index (PPI), experienced an unexpected drop as well.
Falling consumer prices will increase the possibility of rate cut later in the year, which is what the market has been hoping for. Tech stocks, especially those with an exposure to AI, will benefit significantly from this. However, not all AI stocks are poised to bring about good fortunes. Below are three to sell before they crash and burn.
C3.ai (AI)
C3.ai (NYSE:AI) runs a full-service AI platform for a variety of enterprises. The software firm’s AI platform empowers developers to create and deploy. Furthermore, C3 offers several turnkey applications, including C3 AI Ex Machina for analysis-ready data, C3 AI CRM, an industry specific customer relationship management solution, and C3 Generative AI Product Suite, a tool that helps to retrieve and present data.
Although C3.ai has made some major commitments to the novel space, its financial figures leave a lot to be desired. Nvidia and Super Micro Computer (NASDAQ:SMCI) are deeply connected to the rise of AI technologies and both companies have begun to see their revenues figures double over recent earnings period. C3.ai, even though the firm has had some successes with its suite of AI products, has reported revenue growth figures that have blown the minds of any investors. For their fiscal year 2025, the enterprise AI software company expects to grow revenue by only 23% on a year-over-year basis. While revenue growth remains in the low double digits, it will be a while before C3.ai generates real free cash flow and net income.
C3.ai’s share price is trading relatively flat at this point in the year.
SentinelOne (S)
Cybersecurity is another vertical of enterprise software that would benefit from the deployment of AI. Digital transformation, especially migration to the cloud, has created numerous synergies in modern businesses, but one unintended adverse effect has been the proliferation of cybersecurity attacks. SentinelOne (NYSE:S) came to the already competitive market with an artificial intelligence solution. In particular, Singularity Platform deployed AI models to make defense against cybers attacks fully autonomous.
From 2020 to the end of 2022, SentinelOne’s platform really gained traction, doubling revenue from year to year. Unfortunately, a troubled macroeconomic environment put a stop to that, and the company’s year-over-year growth rates have, in turn, plummeted.
Rising competition from larger players like CrowdStrike, which has begun to deploy its own AI-enabled endpoint security solutions, looms in the background as well. S shares have dropped 32% on a year-to-date basis.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ:AI) is an Nvidia-backed artificial intelligence startup that develops AI voice solutions for enterprises. The rise of generative AI has placed the company back into the spotlight, and when investors found out that Nvidia had been one of the startup’s backers, its share price began to soar. SOUN rallied as much as 320% in the middle of March, highlighting the high rewards possible in the era of market craze over AI.
Investors are finally coming back to their senses and have tried to ascertain whether the SoundHound’s AI solutions are just hype. A short seller report from Capybara Research, in essence, stated just that. “The Houndify product uses commodity speech recognition to search a manually programmed knowledge graph,” the report asserted. In other words, the SoundHound product likely isn’t anything very special, which could make it easier for competitors to thwart its growth.
On the date of publication, Tyrik Torres 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.