Protect Your Retirement: Avoid These 3 AI Stocks Right Now

You’ve probably heard about the artificial intelligence (AI) “spending boom” that’s fueling explosive growth in the stock market.

The problem is that while many companies are investing heavily in AI, these investments alone are not enough to ensure lasting success. Three AI stocks in particular look very risky right now and probably aren’t safe places for retirement savings.

Here are the three stocks investors might want to be wary of:

1. SoundHound AI: a small dog in a big pound

It’s been a tough year for the voice-activated AI chat platform AI SoundHound (HER 2.43%). News that the AI ​​giant Nvidia The sale of its stake in the company sent the stock price tumbling, and a third-quarter earnings report that showed a record generally accepted accounting principles (GAAP) net loss of $109.3 million despite record revenue of $42 million prompted further selling.

The company appears to be growing revenue through its voice-activated AI chat platform, which is primarily used by restaurant drive-thrus and in automotive applications. However, SoundHound’s 2024 acquisition of agentic AI software company Amelia gave it the opportunity to expand into other customer service-focused industries, like financial services and healthcare. That said, this technology is not new and has many existing competitors – Alexa, anyone? — success is therefore far from assured.

Even after the sharp drop in its stock price and despite the competitive risks it faces, SoundHound’s stock still trades at around 30 times sales level. It’s much more expensive in terms of sales price than most other tech companies. It’s priced even higher than AI leader Nvidia, which currently trades at 25 times sales.

Until SoundHound can demonstrate that it can successfully expand into new sectors, it seems way too expensive to buy.

2. BigBear.ai: The AI ​​Growth Stock That’s Not Growing

BigBear.ai (BBAI 3.90%) offers several AI products, including data analysis and facial recognition software. It sells primarily to the U.S. military and other government security and intelligence agencies. But it hasn’t been as successful as its security-focused AI counterpart. Palantir Technologies (PLTR 2.62%).

BigBear.ai’s revenue has been declining for three years, while other AI companies have seen record sales. This trend doesn’t appear likely to change in 2025: Management issued fourth-quarter revenue guidance of between $24.6 million and $39.6 million. This means that BigBear.ai’s best-case scenario for Q4 is “only” a 9.6% year-over-year revenue decline from $43.8 million in Q4 2024, and its worst-case scenario is a much steeper 44% decline. Compare that to Palantir’s forecast of 61% revenue growth in the fourth quarter.

If BigBear.ai posted the kind of margins that other AI companies have been able to manage (Palantir’s gross margin was 82.5% in the third quarter), it could handle small revenue declines and still remain viable. But BigBear.ai’s gross margin is among the worst in the industry, at just 22.4% in the third quarter. That’s down from 25% in Q2 2025 and 25.9% in Q3 2024, meaning that not only are the company’s sales down, but it’s also making less money per sale.

There are virtually no moves in the right direction for BigBear.ai: its backlog is shrinking, its stock dilution is increasing, its net losses are widening, and its operating cash burn is accelerating. Yet somehow it still trades at a valuation 14x higher than sales. Even at a discount price, this title would be a hard sell. At this valuation, it’s almost ridiculously overpriced.

3. Pony.ai: A newcomer

The third AI title is one I would avoid for a different reason.

Pony.ai (PONY 4.66%) had its initial public offering (IPO) less than a year ago. The company focuses on AI-powered autonomous vehicles and reported 72% year-over-year revenue growth in the third quarter, driven by strong growth in its robotaxi services and licensing revenue.

So why avoid this young, growing company? Well, it’s a bit Also young at the moment.

Because it was not made public until November 2024, Pony’s first full quarterly SEC earnings report was for the fourth quarter of 2024. This report showed a sharp year-over-year decline in revenue, from $50.6 million in the fourth quarter of 2023 to $35.5 million in the fourth quarter of 2024. In 2023 and 2024, the fourth quarter was the highest quarter for the company, accounting for 47% of 2024 revenue. and 70.4% of revenue in 2023, so Q4 is clearly the most critical quarter of the year for Pony.ai. This year’s fourth-quarter report will have added importance as the first opportunity to get an apples-to-apples comparison of year-over-year changes in the company’s quarterly financials.

I wouldn’t buy Pony.ai stock until I see if fourth-quarter revenue increases or decreases from a year ago and if the rest of its financial metrics appear to be on track. Again, I would only buy most companies at least a year after their IPO to ensure that their optimistic pre-IPO projections prove valid. Retirees who value their savings should do the same.