3 AI Stocks to Avoid this December

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Even though AI stocks have done incredibly well in 2023, there remain shares best left alone. Whether you sell in December or earlier, it’s probably best to get rid of these shares quickly.

Some of these stocks have been among the most heavily promoted and strongest-performing firms in 2023. I would argue that all three have failed to meet expectations. 

The allure of finding smaller-name AI stocks is clear: Unearthing hidden gems is a lucrative endeavor. Two of the names on this list qualify as smaller AI names. However, I would vehemently discourage investors from considering either of them at this point.

Upstart Holdings (UPST)

Upstart Holdings (NASDAQ:UPST) is among the most dangerous AI stocks available to investors. The company has applied artificial intelligence (AI) to its lending platforms and has gained a lot of attention in doing so. Much of that attention was also negative, judging by the fact that nearly 42% of its float is sold short at present. Thus, a lot of investors are betting that Upstart Holdings will continue to decline.

The reason I’m among their ranks is that I plainly don’t believe in the promises of applying AI to the lending process. It’s a fool’s errand to think an algorithm can accurately assess the multifactorial decision process required. It’s analogous to the situation that happened with home-buying algorithms not long ago. They were touted as a solution that was better than a human-centered approach. However, they couldn’t foresee the increase in rates with any degree of accuracy. As a result, they ended up losing vast sums of money.

AI remains underdeveloped for application to the field of lending. Upstart Holdings’ revenues fell 14% during the most recent period, and its losses were greater than expected. That’s a perfect example of why investors should continue to be skeptical of the company and its promise.

C3.ai (AI)

C3.ai (NYSE:AI) is an enterprise software firm that leverages AI. It was identified as being a leader in that regard. In turn, its stock took off in 2023 on the massive promise of AI applications in the enterprise landscape.

Share prices quadrupled from $11 to $44 in the span of a few months, peaking by early August. Prices have fallen below $30 at present. Like Upstart Holdings, C3.ai is also subject to weak investor sentiment as measured by short selling. Nearly 30% of its float is sold short at the moment.

The reason so many investors are skeptical is because the company continues to disappoint. It posted results in September that heavily contributed to overall skepticism. The company had predicted non-GAAP profitability by the end of the current fiscal year. However, CEO Thomas Siebel recanted that promise upon releasing earnings in early September.

The stock is one of the prime examples of why investors have grown skeptical of AI. Until the company can live up to its profitability promises, it is not worth your money.

Veritone (VERI)

Veritone (NASDAQ:VERI) is the kind of company that promises to be everything to everyone. In the process, it fails to be anything to anyone. It is a generative AI company that believes its services and products apply to all. The company’s mission statement is a dead giveaway. It is littered with words like empowered, democratization and more vibrant opportunities for users of AI everywhere. 

It is long on words and short on results. In the third quarter, revenues fell by 6% to $35.1 million. Software revenues make up the bulk of its business accounting for $20.4 million of its revenues during the period. However, software revenues fell by 29% that quarter, which should be particularly troublesome to investors.

That isn’t to say the company hasn’t shown improvement — it has. There have been some bright spots, including strong bookings figures. But overall, the company doesn’t do enough to detract from the negatives. Most importantly, the company’s net loss increased from $4.9 million to $20.9 million year-over-year.

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