Key Points
Even after a share price drop, SoundHound AI is trading at an expensive 30 times sales.
BigBear.ai’s revenue has been shrinking, and its margins are very low for the sector.
Pony.ai is about to release a critical Q4 earnings report, which will tell investors a lot about its health.
By now, you’ve probably heard about the artificial intelligence (AI) “spending boom” that’s powering the stock market’s explosive growth.
The trouble is, while lots of businesses are investing heavily in AI, those investments alone aren’t enough to ensure lasting success. Three AI stocks in particular are looking very risky right now, and probably aren’t safe places for retirement savings.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
Here are the three stocks investors might want to watch out for:
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1. SoundHound AI: A small hound in a big pound
It’s been a rough year for voice-enabled AI chat platform SoundHound AI (NASDAQ: SOUN). News that AI giant Nvidia sold its stake in the company caused share prices to plummet, 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 sell-offs.
The company does seem to be growing revenue from its voice-enabled AI chat platform, which is used primarily by restaurant drive-thrus and in automotive applications. However, SoundHound’s 2024 acquisition of agentic AI software company Amelia has given it the opportunity to expand into other customer-service-focused industries, like financial services and healthcare. That said, this technology isn’t new and has plenty of existing competition — Alexa, anyone? — so success is far from assured.
Even after its big share price drops and despite the competitive risks it’s facing, SoundHound’s stock is still trading at about 30 times trailing sales. That’s way more expensive on a price-to-sales basis than most other tech companies. It’s even more richly priced than AI leader Nvidia, which currently trades at 25 times trailing sales.
Until SoundHound can demonstrate that it can successfully expand into new industries, it looks way too overpriced to buy.
2. BigBear.ai: The AI growth stock that isn’t growing
BigBear.ai (NYSE: BBAI) offers several AI products, including data analytics and facial recognition software. It sells primarily to the U.S. military and other government security and intelligence agencies. But it hasn’t been nearly as successful as its security-focused AI peer Palantir Technologies (NASDAQ: PLTR).
BigBear.ai’s revenue has been declining for three years, while other AI companies have achieved record sales. That trend doesn’t seem likely to change in 2025: Management has issued fourth-quarter revenue guidance of between $24.6 million and $39.6 million. That means BigBear.ai’s best-case Q4 scenario is “only” a 9.6% year-over-year revenue decline from Q4 2024’s $43.8 million, and its worst-case scenario is a much steeper 44% decline. Compare that to Palantir’s guidance of 61% revenue growth in Q4.
If BigBear.ai were posting the kinds of margins that other AI companies have been able to manage — Palantir’s gross margin was 82.5% in Q3 — it could handle some slight revenue declines and still remain viable. But BigBear.ai’s gross margin is among the worst in the industry, at just 22.4% in Q3. That was down from 25% in Q2 2025 and 25.9% in Q3 2024, meaning that not only are the company’s sales slipping, but it’s also making less money per sale.
There’s hardly a single metric moving in the right direction for BigBear.ai: Its backlog is shrinking, its share dilution is growing, its net losses have been widening, and its operating cash burn has been accelerating. Yet somehow, it’s still trading at a premium valuation of 14 times trailing sales. Even at a discount price, this stock would be a tough sell. At this valuation, it’s almost laughably overpriced.
3. Pony.ai: A new arrival
The third AI stock is one I’d avoid for a different reason.
Pony.ai (NASDAQ: PONY) 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 Q3, driven by robust growth in its robotaxi services and licensing revenue.
So why avoid this fast-growing young company? Well, it’s a little bit too young right now.
Because it only went public in November 2024, Pony’s first comprehensive quarterly SEC earnings report was for Q4 2024. That report showed a sharp year-over-year revenue drop from $50.6 million in Q4 2023 to $35.5 million in Q4 2024. In both 2023 and 2024, Q4 was the highest-revenue quarter for the company, providing 47% of 2024 revenue and 70.4% of the revenue in 2023, so Q4 is clearly the most critical quarter of the year for Pony.ai. This year’s Q4 report will have added significance as our first chance to get an apples-to-apples comparison of year-over-year changes in the company’s quarterly finances.
I wouldn’t buy shares of Pony.ai until I see whether Q4 revenue goes up or down from the prior year, and whether the rest of its financial metrics appear to be on track. Then again, I wouldn’t buy most companies until at least a year after their IPO to make sure their rosy pre-IPO projections turn out to be valid. Retirees who value their savings should do the same.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
