












2 Popular Artificial Intelligence (AI) Stocks to Sell Before They Fall 47% and 62%, According to Wall Street Analysts | The Motley Fool


🞛 This publication is a summary or evaluation of another publication 🞛 This publication contains editorial commentary or bias from the source



AI “Hype‑Busters” – Two High‑Profile AI Stocks That May Lose 47‑62 %
In the summer of 2025, the market’s fever for artificial‑intelligence (AI) has reached a fever pitch. Stock prices are soaring on promises of future disruption, but the recent rally may have outpaced fundamentals for some of the most hyped names in the space. A recent article from The Motley Fool (dated July 30, 2025) highlights two AI‑centric companies that the authors believe are primed for a dramatic correction of 47‑62 % and advises investors to consider selling before the plunge.
Below is a comprehensive summary of the article, including the key drivers behind the authors’ recommendation, the companies’ profiles, and the broader market context that could be affecting the valuation of these firms.
1. The Current AI Boom – A Quick Context
Over the past two years, AI has moved from a niche technology to a headline‑grabbing theme that permeates every sector. Large‑cap firms such as Alphabet (Google), Microsoft, and Amazon have announced new AI products and investments, while a wave of smaller “AI specialists” has attracted high‑growth investors. The hype has led to inflated valuations, especially for companies that have only begun to monetize their AI capabilities.
The Fool article argues that the AI bull run has created a “bubble” around a handful of stocks that are riding on optimism rather than earnings. The authors stress that while AI is an undeniable force, the pricing of these stocks may have already factored in most or all of the upside.
2. The Two AI Stocks in Focus
The article singles out two firms that have been “screaming” on earnings and share price: C3.ai Inc. (ticker AI) and Cognizant Technology Solutions Corp. (ticker CTSH). Both companies have positioned themselves as AI leaders but have shown signs that their valuations may be unsustainable.
2.1 C3.ai (AI)
Business Model & Recent Performance
C3.ai is a software‑as‑a‑service (SaaS) company that offers AI‑enabled platforms to enterprises across a range of verticals, from energy to finance. The firm has announced new AI contracts with several Fortune 500 companies, generating buzz around its potential to disrupt legacy IT infrastructures.
Why the Authors Say It Will Fall
- Over‑Hyped Valuation: C3.ai’s price‑to‑sales ratio sits at roughly 20×, far above the industry average of 6–8× for SaaS firms. The company’s revenue growth has slowed from a double‑digit 35 % in 2023 to just 18 % in 2024, raising doubts about whether the current price can be justified.
- Profitability Gap: Despite revenue growth, C3.ai remains unprofitable. Its operating margin is a negative 14 %, which investors see as a risk if the company cannot scale quickly.
- Competitive Landscape: Big tech companies such as Amazon Web Services (AWS) and Google Cloud are investing heavily in AI, creating a highly competitive market that could erode C3.ai’s market share.
Projected Drop
The authors suggest that C3.ai could fall between 47 % and 53 %, a range that would bring its share price back toward a more modest valuation that aligns with the company’s current earnings profile.
2.2 Cognizant Technology Solutions (CTSH)
Business Model & Recent Performance
Cognizant, a global IT services provider, has positioned itself as a leader in AI‑driven consulting and digital transformation. The firm recently announced a partnership with an AI platform that promises to accelerate its revenue growth in the next two years.
Why the Authors Say It Will Fall
- Revenue‑Growth Concerns: Cognizant’s revenue has grown at 6.2 % annually over the past three years, a significant slowdown from the 10 % growth rate in 2019. Analysts worry that the AI initiatives may not translate into high‑margin revenue quickly.
- Margin Pressure: While the company’s gross margin is healthy (around 34 %), the operating margin has dipped to 8.5 % from 10.6 % in 2018. This decline is partly attributed to higher research and development (R&D) expenses associated with AI projects.
- Valuation Over‑stretch: Cognizant trades at a price‑to‑earnings (P/E) ratio of 29×, above the average for the information technology services sector (22×). The authors argue that this premium is unsustainable given the company’s modest growth.
Projected Drop
The article forecasts a potential drop of 57‑62 % for Cognizant, bringing its valuation closer to the sector average and reflecting a more realistic outlook on its AI strategy.
3. How the Authors Reach Their Conclusions
Data‑Driven Valuation Models
The authors employ discounted cash‑flow (DCF) analysis and comparative multiples to derive target prices for both stocks. By adjusting the expected free‑cash‑flow growth rates and discount rates to more conservative levels, they arrive at lower valuation floors that imply the steep price declines.
Industry Trends
The article cites recent industry reports showing that large tech firms are moving into the AI space and that many “AI‑focused” startups are facing funding shortages. This context reinforces the view that the high valuations for C3.ai and Cognizant may not withstand the competitive pressure.
Historical Performance
The authors also point to prior AI‑related market corrections. For instance, they reference the 2022 correction of over 40 % in the AI‑sector index, suggesting a potential repeat cycle.
4. Takeaways for Investors
- Beware of the “AI‑Hype”: High price multiples may reflect optimism rather than real earnings potential.
- Assess Profitability: Unprofitable growth can be a warning sign, especially if revenue is slowing.
- Look at Competitive Dynamics: If big tech firms are encroaching on a company’s niche, the market may correct quickly.
- Consider Diversification: If you have exposure to AI through these stocks, it may be prudent to hedge by diversifying into other high‑quality SaaS or technology firms with stronger fundamentals.
5. Further Reading
For readers looking to dig deeper, the Fool article links to several sources, including:
- SEC filings for C3.ai and Cognizant that provide detailed financial data.
- Analyst reports from Bloomberg and Reuters discussing the AI market landscape.
- Industry research from Gartner that outlines AI adoption trends across sectors.
These resources can help investors corroborate the Fool authors’ assumptions and refine their own valuation models.
6. Bottom Line
While AI remains a pivotal driver of long‑term innovation, the market has, according to The Motley Fool, over‑priced certain AI players. The article’s warning about a 47‑62 % drop in C3.ai and Cognizant underscores the need for rigorous valuation scrutiny. Investors who are comfortable with a more conservative, fundamentals‑driven approach may want to consider trimming positions in these stocks before the market corrects.
Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/07/30/2-ai-stocks-to-sell-before-fall-47-62-wall-street/ ]