What AI Stock You Should Avoid & What to Buy With Confidence
AI stock investing is hot right now. Everyone wants a piece of the future, and tech companies are riding the wave, but not all AI stocks are built the same. Some are riding hype more than substance.
Let’s break down which AI stock looks shaky and which one you can count on:
The AI Stock to Avoid Right Now (June, 2025)
Palantir (PLTR) looks shiny on the surface. Since late 2022, its stock has exploded by nearly 2,000%. Investors are drawn to its sleek AI platforms, Gotham for governments and Foundry for businesses. Sounds futuristic, right? But take a closer look, and cracks start to show.
The growth potential of Gotham is starting to stall. Its customer base is limited mostly to U.S. allies, and looming defense budget cuts could hit hard. That is a narrow lane to drive growth. Palantir needs to grow faster to justify its sky-high valuation, but Gotham’s ceiling is lower than it looks.
Finance Time / Right now, Palantir’s current price is downright wild. Its price-to-sales ratio is over 100.
Most companies in past tech bubbles topped out around 30 to 40. History shows that when a “next-big-thing” stock soars too fast, a correction often follows. Analysts see this too. Many peg its true value as 24% lower than where it’s trading now. That is a red flag waving in plain sight.
What to Buy Instead?
Here is where it gets good. Alphabet (GOOGL) is not just in the AI race; it is building the track. If you are looking for a solid AI stock, this one is hard to beat. First, Google Search still rules the internet, with a grip on 89 to 93% of global traffic.
Even with all the buzz around AI chatbots, Google’s ad revenue just keeps climbing, up 10% year over year.
Now look at Google Cloud. It is pulling in nearly $50 billion annually and growing fast. More importantly, it is baking generative AI into its services. This is not just about fun chatbots anymore. It is about real tools that help companies work smarter, faster, and cheaper. That kind of AI gets sticky and profitable.
Then there is Alphabet’s war chest. They are sitting on $95 billion in cash. That means money for stock buybacks, AI research, and big moves if opportunities pop up. Even better, it is trading at a discount, about 24% lower than its five-year average forward price-to-earnings ratio. Compared to the S&P 500’s 22.1, Alphabet’s 16.9 looks like a deal hiding in plain sight.
Keep in mind that investing in AI stocks should be more than chasing headlines. Palantir’s been hyped up because it sounds cool, not because it is making reliable money.
E Online / Unlike Palantir, Alphabet has the tech, the reach, and the cash to keep building. Something that is worth buying!
It is not trying to look like the future. Instead, it is the infrastructure behind it. Search, ads, cloud, and AI innovation all stack up.
What Do Smart Investors Do?
Smart investors don’t just jump on trends. They ask the hard questions. What is the growth plan? Where is the revenue coming from? Can this company handle a slowdown or a market shakeup? When it comes to AI stock decisions, being picky is smart.
That is why avoiding Palantir makes sense. There is too much priced in already, and too many risks waiting to pop. It might not crash tomorrow, but the ceiling is lower than the price suggests. On the flip side, buying Alphabet gives you AI exposure without gambling.