With the rise of ChatGPT, a form of artificial intelligence, investors are looking out for an opportunity to make big gains in the stock market. Not all AI stocks are golden tickets, however. There could be some AI stocks that investors should stay away from. Justin Pope of C3.ai, Jake Lerch of Upstart Holdings and Will Healy of Lemonade are some of the stocks to avoid.
Justin Pope of C3.ai sells AI-powered technology that ranges from managing supply chains to identifying money laundering. The company has seen a number of alterations in its lifetime with names, CFOs and models. Additionally, C3.ai is not clear in how many customers it has, as the company states one figure yet defines customers differently in a 10-Q filing. Investors should ask some questions before investing in this stock as it has seen low single digit revenue growth in the past fiscal year and an overall net loss.
Jake Lerch of Upstart Holdings is an AI lender that has seen a sharp drop off in stock prices. The potential behind Upstart lies in its ability to disrupt the credit rating system, however, the company is facing greater losses as the Federal Reserve tightens it’s stance on monetary policy, reducing lenders ability to lend. Investors should consider focusing their attention moreso on the more successful name of credit ratings, Fair Isaac Corporation, for AI lending instead.
Will Healy of Lemonade is an innovative AI insurer that applies particular factors to auto insurance such as driving habits and miles driven. The stock has drastically declined from their January 2021 highs and gross loss ratios have been consistently high. In order for the stock to gain value, Lemonade needs to make changes to their business model and significantly reduce their losses, to be profitable. While Lemonade has the potential for great returns, the risks seem to outweigh the rewards as of now.
It is important to do your research before choosing any AI stocks to invest in to ensure that they are the right fit for you. Assessing the success, future potential, and financials of a company are some key steps to take before diving in. AI stocks have a chance to yield big gains and aligns with a promising technology, yet it’s best to apply caution and careful scrutiny before considering any AI stocks.
