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AI bubble is bursting: top AI stocks to sell to avoid long-term losses

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March 9, 2025
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AI bubble is bursting: top AI stocks to sell to avoid long-term losses
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The artificial intelligence (AI) industry has propelled the US equities market in the past few years. Its strong growth has helped to propel many companies higher, with NVIDIA’s market cap jumping to over $3 trillion. 

Recently, however, there are signs that the AI bubble is bursting, which will affect some of the top performers. This article highlights the top AI stocks to sell to avoid long-term losses.

AI stocks to sell now to avoid losses

Investors are typically driven by fear and greed. As such, these investors tend to crowd sectors showing substantial promise. In the late 1990s, the theme was dot-com companies that were doing well. This ended in early 2000s as the dot com bubble burst. 

Most recently, cannabis stocks like Tilray Brands, Cronos, and Canopy Growth surged as investors anticipated that the indusry would boom after the US legalization. All these stocks have tanked, with the MSOS ETF that tracks the biggest American companies in the industry, falling by over 94% from its all-time high.

Read more: Whatever happened the cannabis stock bubble? What next?

The electric vehicle industry is another one that boomed as many companies sought to mirror Tesla’s performance. Today, most EV stocks like Rivian and Lucid have imploded, while companies like Canoo and Fisker have filed for bankruptcy. 

This view can also be explained in terms of the Wyckoff Theory, which identifies the four phases that stocks go through. Stocks initially go through the accumulation phase, followed by the markup where stocks surge as the fear of missing out (FOMO) intensifies. They then go through the distribution and the markup. 

Some of the top AI stocks to sell to avoid huge losses in the future are Palantir Technologies (PLTR), SoundHound AI (SOUN), and CrowdStrike (CRWD).

Palantir Technologies (PLTR)

Palantir Technologies is one of the top AI stocks to sell to avoid losses in the long term. It has already crashed by over 30% since our last warning on the company. 

The main issue with Palantir is its valuation considering that its market cap surged to over $230 billion recently. It has now retreated to about $200 billion but remains highly overvalued. 

While Palantir Technology’s business is booming its forward PE ratio of 147 is much higher than the S&P 500 index average of 22. It is also much higher than other companies in the index that are doing well. 

Palantir is still growing, with analysts expecting that the revenue will grow by 37% in Q1 and 32% in 2025. Even with this growth, it is hard to justify this valuation. There are also signs that the stock has moved into the distribution phase of the Wyckoff Theory.

CrowdStrike (CRWD)

CrowdStrike is one of the top AI stocks to sell before it drops further. It has already plunged by over 27% from its highest level this year, and is hovering at its lowest level since November last year.

CrowdStrike’s business is doing well, with its revenue rising by 25% to $1.06 billion in the fourth quarter. Its annual recurring rate rose by 23% to $4.24 billion. Analysts expect that the revenue will grow by 21% this year and 21.85% in 2026. However, its valuation is still high since it has a forward PE ratio of 97, much higher than the S&P 500 average of 21.

Read more: Why CrowdStrike’s weaker guidance could be a smart buying signal

SoundHound AI (SOUN)

SoundHound is another top AI stock to sell even as it plunged by over 60% from its all-time high. The most recent results showed that the company’s business was still doing well as its revenue rose by 101% to $34.5 million. 

This revenue growth brought its annual figure to over $84 million. Analysts expect that its revenue will grow by 96% this year to $166 million, followed by $215 million next year.

The challenge, however, is whether the company can continue its momentum profitably now that competition is rising.

The post AI bubble is bursting: top AI stocks to sell to avoid long-term losses appeared first on Invezz

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