AI Stocks Risk Recession as Investors Book Profits

AI Stocks Face Headwinds Amid Recession Concerns: Investors should closely monitor both C3.ai and The Trade Desk as they navigate challenging market conditions in 2025. Key metrics suggest growth potential but underlying risks persist.

Date: 09-04-2025

AI Rating: 6

**Market Stress and Potential Growth Amid Recession** The report highlights the challenges faced by technology stocks, particularly in the artificial intelligence (AI) sector, amid broader economic uncertainties. The Nasdaq Composite entering bear market territory is a significant signal of a downturn affecting tech-heavy portfolios, pushing investors to liquidate their positions in pursuit of capital preservation. The future outlook for companies like C3.ai and The Trade Desk, which are integral to the AI landscape, is mixed. C3.ai's stock has dropped 44% year-to-date but shows 25% year-over-year revenue growth in its fiscal 2025, up from 15% in the previous year, indicating a potential rebound. The company’s partnerships with tech giants like Microsoft and Amazon link directly to enhanced growth visibility and lower sales cycles, making it attractive from an investment perspective. However, its market correction raises concerns. The analysts’ enhanced revenue growth expectations suggest optimism surrounding continued market demand for generative AI, which is poised to grow. Meanwhile, The Trade Desk has faced a staggering 60% decline, attributed partly to poor quarterly results. The current low price-to-earnings ratio signals that some of the negative impacts are already priced into the stock, making it potentially undervalued. Although earnings growth is forecasted at just 8%, which pales compared to traditional growth standards, the shift to an AI-integrated platform could drive future increases in revenue—addressing the digital advertising market's rapidly evolving needs. This long-term positioning could offer solid upside if the digital ad space rebounds. However, structural adjustments may weigh on 2025 earnings. Though C3.ai's revenue growth is encouraging, the overall market conditions and the looming recession cast a shadow over potential performance, highlighting that investment decisions will require careful consideration amid volatility. The explosion in demand for AI-powered solutions over the next several years could shape a new growth trajectory for pivotal players in this tech sector, albeit risk-laden. **Earnings Per Share (EPS)**: The Trade Desk projects a modest EPS growth of 8%. **Revenue Growth**: C3.ai anticipates continued revenue growth, with an annualized increase of 25%. **Net Income**: Mixed signals from both companies, as ongoing investments and market volatility may suppress net income in the short term. **Free Cash Flow (FCF)**: Not explicitly addressed, but growing revenues may lead to improved FCF in the longer term. **Return on Equity (ROE)**: Not mentioned directly, but growth trajectories in both companies will influence ROE positively if profit margins are sustained.

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