2 AI Stocks to Avoid (Including BigBear.ai) and 1 to Buy Now
2 AI Stocks to Avoid (Including BigBear.ai) and 1 to Buy Now
Leo Sun, The Motley FoolSat, May 16, 2026 at 11:40 PM UTC
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Key Points -
BigBear.ai and C3.ai are losing their relevance in the crowded AI software market.
Broadcom will remain a “best in breed” AI chip play for the foreseeable future.
10 stocks we like better than BigBear.ai ›
Many artificial intelligence (AI) stocks skyrocketed over the past few years as more companies embraced AI-powered analytics services, generative AI platforms, and agentic AI tools. That boom should continue for the foreseeable future, driving the market's top AI stocks even higher.
Yet not every AI stock that glitters is gold. Let's see which two AI stocks you should avoid in this wobbly market -- and which high-flying AI stock is still worth buying today.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
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The two AI stocks to avoid: BigBear.ai and C3.ai
BigBear.ai (NYSE: BBAI) and C3.ai (NYSE: AI) both develop AI modules that can be plugged into an organization's existing software infrastructure to analyze and automate certain tasks.
BigBear.ai's modules are designed for edge networks, and it generates most of its revenue from government and defense contracts. C3.ai's modules are designed for a broader range of computing platforms and serve a more diverse mix of enterprise and government clients.
From 2021 to 2025, BigBear.ai's revenue declined from $146 million to $128 million, while its net loss widened from $124 million to $294 million. That decline was caused by the bankruptcy of its top customer, Virgin Orbit, competition from similar AI companies, and fierce macro headwinds. BigBear.ai's sales slumped even after it acquired the AI vision firm Pangiam in 2024, won several new government contracts, and the broader AI market expanded.
From 2025 to 2027, analysts expect BigBear.ai's revenue to grow at a 12% CAGR to $159 million, but most of that growth will come from its recent acquisition of the generative AI platform provider, Ask Sage. With a market cap of $2.1 billion, this lackluster AI stock still trades at 15 times this year's sales -- and it could sink much lower in a messy market downturn.
From fiscal 2022 to fiscal 2025 (which ended last April), C3.ai's revenue jumped from $183 million to $389 million, but its net loss widened from $56 million to $289 million. Its top line grew as it launched new generative AI modules, gained more government contracts, and renewed a key joint venture with Baker Hughes through 2028. However, its gross margins shrank as it relied more heavily on lower-margin services and usage-based fees (rather than its stickier subscriptions) to drive its sales. It also faced stiff competition from similar companies.
From fiscal 2025 to fiscal 2028, analysts expect C3.ai's revenue to drop from $389 million to $251 million as it loses ground to its competitors, disrupts its own sales teams with a major restructuring, and cannibalizes its own subscriptions with its usage-based plans. With a market cap of $1.3 billion, C3.ai might not seem expensive at five times this year's sales, but its upside will remain limited as long as it can't resolve its most pressing problems.
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The AI stock to buy: Broadcom
Broadcom (NASDAQ: AVGO) sells a wide variety of chips and infrastructure software. It aggressively expanded both segments with big acquisitions over the past decade.
From fiscal 2021 to fiscal 2025 (which ended last November), Broadcom's revenue and adjusted earnings before interest, taxes, and depreciation (EBITDA) grew at CAGRs of 24% and 27%, respectively. Most of Broadcom's recent growth came from its sales of customized application-specific integrated circuits (ASICs) for AI applications. Its top hyperscaler customers -- including Meta and Alphabet -- work with the company to create customized ASICs for their own data centers to boost efficiency, cut costs, and curb their long-term dependence on Nvidia's GPUs.
In fiscal 2025, its sales of AI chips surged 65% to $20 billion, accounting for 31% of its top line and offsetting its slower sales of non-AI chips and infrastructure software. It expects that figure to soar to $60-$90 billion by the end of fiscal 2027 as the AI market expands.
From fiscal 2025 to fiscal 2028, analysts expect Broadcom's revenue and adjusted EBITDA to both grow at a 48% CAGR. Its enterprise value of $2.1 trillion might seem high, but it still looks surprisingly cheap at 18 times next year's adjusted EBITDA. That makes it a much better play than C3.ai or BigBear.ai on the ongoing AI boom.
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Leo Sun has positions in Meta Platforms. The Motley Fool has positions in and recommends Alphabet, Broadcom, Meta Platforms, and Nvidia. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
Source: “AOL Money”
