Be careful investing in AI stocks

Source: https://www.overlookedalpha.com

I just watched a TikTok about how many millionaires are going to be created from using AI.And if you look at the stock market, many AI companies are on a tear, with some of them up more than 200% this year already.

But, you have to be very careful when investing in AI companies. Because some of these so called AI stocks on the market are not necessarily doing very advanced AI.

C3, for example, has been called a cash-burning consulting company that masquerades as a software business. The company has a market cap of 2.1 billion which is 8 x revenue and a queue of short sellers trying to short the stock.

Meanwhile, Bigbear.ai tripled in value after a supposed contract win with the US air force. However, that contract was completely misinterpreted by the market. And that stock also has a very high short interest.

There are companies like SoundHound and Guardforce AI and many more. They might be doing some type of AI but it’s just not clear how advanced any of these products really are.

For the most part, we agree with this tweet from dali Bali which reads: Any AI company with meaningful revenue today probably isn’t real AI.

After all, the company behind ChatGPT, OpenAI was started as a non-profit and has only just started to monetize. OpenAI are making real advances but they’re not a public company so you can’t invest in them directly.

Of course, some companies will hit it big with AI. The problem is that many of these companies on the public market are just trying to jump on the bandwagon. We’ve clearly entered a hype cycle and these companies are trying to take advantage and many of these AI stocks are going to end up being very poor investments.

#stocks #investing #stockstowatch #aistocks