Companies caught off-guard from the Chatbot shift need to prepare their list of stocks to sell. When ChatGPT launched its artificial intelligence chat, its 100 million active user growth in just two months shook up the technology sector.
In an ironic twist, companies that rode the hype by announcing ChatGPT integration are the stocks to avoid. Critical investors who recognize that the Chatbot shift will disrupt its business model will not invest in those companies.
Investors have three companies to avoid.
| AI | C3.ai | $22.19 |
| BBAI | BigBear | $3.14 |
| SOUN | SoundHound AI | $3.13 |
C3.ai (AI)
C3.ai (NYSE:AI) bears the “AI” in its name but needed to integrate Open AI’s ChatGPT, a third-party company, in its product suite, which is only one of the reasons it’s one of the stocks to sell while you can.
In its Jan. 31, press release, C3.ai announced the C3 Generative AI Product Suite. Customers will enjoy a better experience by using a natural language interface. They will find data more rapidly and present it more effectively.
Chief Executive Officer Tom Siebel said that the company built 42 enterprise applications that provide predictive analytics for many industries. Customers that use predictive applications are manufacturers like Boeing (NYSE:BA). The application tells them what part of the supply chain is broken. This simple example is not enough to bet on its AI growth.
In its fiscal second quarter, C3 posted subscription revenue growth of 26%, to $59.5 million. Total revenue grew by only 7% Y/Y. It still lost 63 cents per share, more than the 55 cents per share loss the year before.
BigBear.ai (BBAI)
BBAI describes itself as a leader in the use of AI and machine learning. Before the stock run-up, the firm received a listing notice because it did not trade above $1.00.
On Jan. 12 BBAI stock more than doubled in pre-market when announced a $900 million Indefinite Delivery/Indefinite Quantity contract with the U.S. Air Force. This is a multi-vendor reward, where the company gets a license to bid on task orders. Investors have no way of knowing how much revenue BigBear will earn in an IDIQ contract spanning 10 years.
Five days after the award announcement, the firm took advantage of the stock rally by raising $25 million at an offering price of $1.80 a share.
BigBear will need to slow losses by cutting costs. It already reduced its office locations. In its full-year budget plan, it will likely cut spending on marketing and advertising. This will hurt the company’s revenue growth prospects. Companies that seek savings from technology solutions will adopt Chatbots offered by BigBear’s competitors.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ:SOUN) rallied on Jan. 27, when Airmeez announced a deal. The firms will bring a “seamless conversational AI experience.” Investors bet that the AI-powered virtual assistant would reverse SoundHound’s downtrend.
Growth companies do not cut 40% of staff as SoundHound did. This will cut its costs by 40% as it focuses on Restaurants and reduces investments in new verticals. The company committed to a 50% revenue growth in 2023. It believes its capital-light business model will result in positive operating cash flow in the fourth quarter of this year.
SoundHound AI has a $302 million in bookings backlog. This by no means guarantees profits ahead. In the third quarter, it posted revenue almost doubling to just $11.2 million. It still lost $28.9 million, or 15 cents a share.
Amid a 2023 bear market, investors will not gamble on a company that is nowhere near profitability. SoundHound is among the stocks to sell.
On the date of publication, Chris Lau 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.