AI is the hottest thing in stocks right now. Nvidia’s (NASDAQ:NVDA) historic bull run, thanks to its AI-friendly business, is proof of this.
As a result, many companies are looking to dabble in AI to capitalize off the phenomenon. However, not every such company is having such uninterrupted success as the graphic chips maker. That makes some of these companies AI stocks to sell this June.
When a company’s stock starts going downhill, you need time to watch how it unfolds — preferably from a distance. That’s because it’s hard to tell when such a stock bounces back. It could be months or even years. Sometimes, it’s better to exit your position and put your money in a stock that’s actually promising.
We identified three underperforming companies that could be AI stocks to sell so you can free up your capital for positions with better potential.
C3.ai (AI)
C3.ai (NYSE:AI) is a company that supports businesses with AI tools and applications. Some of the world’s biggest organizations, such as Shell (NYSE:SHEL) Bank of America (NYSE:BAC), Koch Industries and the U.S. Air Force have integrated its product.
The company’s financials look fine on paper — 20% growth year-over-year (YOY) in the first quarter, free cash flow of $18.8 million and no debt. However, C3.ai is lacking in one thing: profitability.
In its Q1 report, the company’s CEO Thomas M. Siebel said it’s foregoing profitability for now to focus on “lead generation, branding, market awareness and customer success,” which he believes presents a “market opportunity.” Siebel said he doesn’t expect the company to be profitable in 2024.
That is all fine and dandy for the company — but not for investors — if its price pattern this year is anything to go by. Besides the occasional price spike, C3.ai stock price has largely been treading water.
Analysts aren’t sold on it either, with MarketWatch giving it an average hold rating. If you have C3.ai in your portfolio and are looking for AI stocks to sell, you might want to consider letting it go.
Dell Technologies (DELL)
Dell Technologies (NYSE:DELL) is one of the few companies manufacturing powerful AI servers. Big corporations experimenting with AI need these servers to train and operate sophisticated AI models and applications.
As a result, Dell’s share value has been on an upward momentum in the last two years because investors see the hardware manufacturer poised to profit from AI’s rise.
But those hopes were dashed last month after the company’s Q1 report showed flat YOY revenues for its AI servers business. Dell shares have been down 22% since then and show no signs of improving, which raises the question of whether it’s an AI stock to sell after all.
Bernstein Financial Services analyst Toni Sacconaghi raised the alarm about Dell’s AI servers “being sold at near-zero margins,” with Bloomberg analyst Woo Jin saying Dell’s current figures “cast some doubt on near-term competitiveness.”
If you have a position in Dell, now is a good time to consider if it’s worth it, at least in the short term.
Shopify (SHOP)
Shares of Shopify (NYSE:SHOP) slid 19% on May 8, the day of its first-quarter earnings release, and haven’t recovered since. The drop was the largest in one day for the Ottawa-based online retailer since it went public nine years ago.
Investors fled after the company reported a net loss of $273 million and issued low guidance for the second quarter. While Shopify’s YOY revenue growth has fallen between the low-to-mid 20s in the past six quarters, the company is now forecasting revenue growth in the high teens in the second quarter.
Shopify’s slump is due to an increasingly competitive niche. E-commerce giants Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT), as well as lesser-known companies Temu and Shein, are all vying for market share. The company is also grappling with a lull in online shopping post-pandemic.
Following Shopify’s Q1 report, Third Bridge analyst Charlie Miner raised concerns about its profitability trajectory, noting it “sound[ed] the alarm bell for investors.”
While a turnaround is still possible for Shopify, its current challenges make it one of the AI stocks to sell in June.
On the date of publication, Hope Mutie did not hold (either directly or indirectly) any positions in the stocks mentioned in this article. The opinions expressed in this article are those of the writer, subject to InvestorPlace.com’s Publishing Guidelines.
