Investors have been turning sour on the AI industry. Many have expected AI stocks to decline for the past two years, but that did not turn out to be the case and AI companies proved bears wrong in each of the past eight or so quarters.
Microsoft has canceled its data center contracts and Trump’s tariff plans are increasingly complicating the AI narrative, especially for semiconductor companies that derive a good portion of their revenue from China.
Perhaps AI could prove the bears wrong again, but considering even Nvidia’s recent earnings beat failed to overpower the cautiousness investors now have about AI, it is worth looking into some bearish arguments.
A good way to do that is by looking into AI stocks that have corrected the most so far this year. The AI industry is quite broad and you’ll be able to gain useful insight into some major AI sectors and their challengers if you look into why these stocks have been declining.
A financial expert pointing to details of stocks while describing the weighted properties of the index.
Methodology
For this article, I screened the worst-performing AI stocks year-to-date. Stocks that I have covered recently will be excluded from this list.
I will also mention the number of hedge fund investors in these stocks. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
15. Rekor Systems Inc (NASDAQ:REKR)
Number of Hedge Fund Holders In Q4 2024: 5
Rekor Systems Inc (NASDAQ:REKR) is an AI-driven roadway intelligence company.
The stock is down significantly so far in 2025 as it posted disappointing quarterly results in late 2024. The company’s revenue fell short of expectations by 25% in its latest earnings report, with losses per share exceeding forecasts by 75%.
On top of that, Rekor announced an at-the-market issuance agreement to sell up to $25 million in common stock. Investors don’t like dilution, so many ended up selling REKR.
REKR is down 13.14% year-to-date.
14. TROOPS Inc (NASDAQ:TROO)
Number of Hedge Fund Holders In Q4 2024: N/A
TROOPS Inc (NASDAQ:TROO) is a company that does money lending in Hong Kong and Australia. It also does IT support for AI and cloud computing.
The stock is down significantly so far in 2025 as TROOPS continues to face significant profitability issues due to intense competition and economic challenges in Hong Kong.
TROOPS Inc reported a net loss of $2.04 million for the trailing twelve months and has a negative net profit margin of 46.89%.
There has also been some dilution here and the stock trades pretty expensively.
TROO is down 14.62% year-to-date.
13. Taboola.com Ltd (NASDAQ:TBLA)
Number of Hedge Fund Holders In Q4 2024: 28
Taboola.com Ltd (NASDAQ:TBLA) is an AI-integrated personal content recommendations platform.
The stock is down significantly so far in 2025 as it reported $491 million in Q4 2024 revenue and exceeded the $476.56 million expected by analysts. It also announced a $200 million expansion to its share repurchase program. This brings the total authorization to $240 million.
The stock still declined since Taboola posted disappointing Q1 2025 guidance and forecasted revenue between $407 million and $427 million. This was well below analyst expectations of $458.2 million.
The company’s full-year 2025 revenue guidance also fell short of the consensus estimate of $2.03 billion and came in at $1.838 billion to $1.888 billion. Adjusted EPS of $0.10 missed by a cent.
The consensus price target of $5.25 implies 69.9% upside.
TBLA is down 15.07% year-to-date.
12. Lemonade Inc (NYSE:LMND)
Number of Hedge Fund Holders In Q4 2024: 25
Lemonade Inc (NYSE:LMND) is a digital insurance company that also uses artificial intelligence and behavioral economics in its operations.
The stock is down significantly so far in 2025 despite some positive events. For example, Lemonade’s revenue increased 29% year-over-year to $149 million and exceeded analyst expectations of $145 million.
However, California wildfires have had a very negative impact here. Lemonade faced significant claims from the California wildfires in late 2024. It is going to cost the company an estimated $20 million in EBITDA.
The guidance was also missed. Lemonade’s guidance for Q1 2025 revenue ($143–$145 million) and full-year 2025 revenue ($655–$657 million) fell short of analyst estimates ($151.4 million for Q1 and $667.5 million for the year).
The consensus price target of $32.67 implies 3.92% upside.
LMND is down 15.13% year-to-date.
11. Veritone Inc (NASDAQ:VERI)
Number of Hedge Fund Holders In Q4 2024: 5
Veritone Inc (NASDAQ:VERI) is a tech company that specializes in AI. It has an aiWARE platform that can transform unstructured data to make them more digestible for its clients.
The stock is down significantly so far in 2025 after it reported declining revenues and widening losses in its Q3 2024 results. The company posted $21.7 million in net losses and a gross profit margin decline.
It also has had a high historical volatility and hasn’t been anywhere near profitable. Veritone is also dilutive as it raised $20.3 million recently.
The consensus price target of $4.06 implies 47.73% upside.
VERI is down 16.31% year-to-date.
10. Bit Digital Inc (NASDAQ:BTBT)
Number of Hedge Fund Holders In Q4 2024: 14
Bit Digital Inc (NASDAQ:BTBT) is a Bitcoin mining company. Much like many Bitcoin miners, it is pivoting to HPC computing and AI after the halving last year.
The stock is down significantly so far in 2025 as BTC has declined significantly. It is now below $90,000 as of writing and could go down more as market sentiment has been souring on crypto and AI stocks as a whole.
These mining companies are pivoting to AI in order to make their business look more attractive to shareholders, but it could have the opposite effect if investors sour on both AI and crypto. That seems to be happening right now.
The consensus price target of $6.33 implies 158.5% upside.
BTBT is down 16.38% year-to-date.
9. eGain Corp (NASDAQ:EGAN)
Number of Hedge Fund Holders In Q4 2024: 6
eGain Corp (NASDAQ:EGAN) is a software company with AI-powered customer engagement services.
The stock is down significantly so far in 2025 despite it reporting some decent figures for its Q2 2025 report. It posted 17% year-over-year annual recurring revenue growth which was attributed to strong demand for customer service automation.
That said, it lowered its full-year revenue guidance down to $88.5 million to $92.4 million. It also posted a 6% year-over-year decline in revenue. Q3 projected revenues of $21 million to $21.5 million and EPS of $0 to $0.02 are both below analyst estimates of $23.6 million and $0.07 EPS.
The consensus price target of $8.5 implies 68.65% upside.
EGAN is down 18.78% year-to-date.
8. Ivanhoe Electric Inc (NYSEAMERICAN:IE)
Number of Hedge Fund Holders In Q4 2024: 13
Ivanhoe Electric Inc (NYSEAMERICAN:IE) is a mining company that uses AI, like its Typhoon geophysical system.
It raised $69 million through a public offering at $5.85 per unit. Each unit included one common share and a warrant to purchase another share at $7 within a year.
As such, the main cause of IE stock decline is dilution. And earlier in the year, BlackRock reduced its stake in Ivanhoe Electric.
The stock is down significantly so far in 2025.
The consensus price target of $13.17 implies 115.85% upside.
IE is down 19.34% year-to-date.
7. ZJK Industrial Co Ltd (NASDAQ:ZJK)
Number of Hedge Fund Holders In Q4 2024: 1
ZJK Industrial Co Ltd (NASDAQ:ZJK) makes fasteners and metal parts for industries, including for AI-related clients.
The stock is down significantly so far in 2025 despite some good news. It announced an expansion of its collaboration with Nvidia. It included some new projects and a specialized engineering team that will be dedicated to Nvidia.
Also, preliminary financial results for fiscal year 2024 showed continued revenue growth of over 30% year-over-year. Gross margins also improved to 46.57%. It was 34.34% a year ago.
The stock has still declined since its collaboration with Nvidia may not be “good news” in the eyes of the market right now. Investors are scrutinizing AI-related stocks and have been especially careful after Microsoft canceled some of its data center contracts. Many think the negative effects could spill over into companies like ZJK.
On top of that, early investors are becoming eligible to sell shares after the lock-up period following its September 2024 IPO.
ZJK is down 19.36% year-to-date.
6. C3.ai Inc (NYSE:AI)
Number of Hedge Fund Holders In Q4 2024: 25
C3.ai Inc (NYSE:AI) is an AI software company. It is still sort of a poster child for AI startups due to its ticker.
The stock is down significantly so far in 2025 after it reported strong Q3 FY2025 results but posted disappointing guidance. Revenue went up 26% year-over-year to $98.8 million but its guidance for the fourth quarter and the full year missed expectations.
The company projected Q4 revenue between $103.6 million and $113.6 million, slightly below analyst estimates of $108.6 million at the midpoint. Similarly, its full-year revenue forecast of $383.9 million to $393.9 million was in line with expectations but failed to inspire confidence.
Also, CEO Thomas Siebel sold stocks in both January and February 2025 and news about Microsoft scaling back its data center contracts has also hurt AI stocks across the board.
The consensus price target of $35 implies 32.42% upside.
AI is down 22.89% year-to-date.
5. D-Wave Quantum Inc (NYSE:QBTS)
Number of Hedge Fund Holders In Q4 2024: 15
D-Wave Quantum Inc (NYSE:QBTS) is a quantum computing company. Many see it as the next logical step due to AI compute power needs increasing exponentially (potentially).
The stock is down significantly so far in 2025 as it isn’t profitable and has been diluting.
D-Wave raised $150 million through an at-the-market equity offering and diluted existing shareholders. Some have decided to sell before any future dilution takes place. And that is likely to happen in the coming years since it is a capital-intensive business.
It’ll likely take decades for quantum computing to be commercially viable. Microsoft’s recent announcement of a quantum computing chip also failed to drive much hype beyond the short term.
The consensus price target of $6.71 implies 9.43% upside.
QBTS is down 26.96% year-to-date.
4. Core Scientific Inc (NASDAQ:CORZ)
Number of Hedge Fund Holders In Q4 2024: 66
Core Scientific Inc (NASDAQ:CORZ) is a crypto mining company. Crypto mining companies across the board are pivoting to AI and HPC in the hopes that this will push their stocks back up.
The stock is down significantly so far in 2025 as not only are crypto miners struggling to mine Bitcoin post-halving, but their shift to data centers and HPC makes investors twice as nervous in the current environment. Investors are increasingly becoming nervous about AI and many AI stocks have corrected by double digits.
Core Scientific reported a $265.5 million net loss in Q4 2024. This widened from $195.7 million in the previous year while revenue fell 33% year-over-year to $94.9 million.
The consensus price target of $19.07 implies 90.29% upside.
CORZ is down 28.26% year-to-date.
3. Palladyne AI Corp (NASDAQ:PDYN)
Number of Hedge Fund Holders In Q4 2024: N/A
Palladyne AI Corp (NASDAQ:PDYN) is an AI and machine learning company targeting the robotics industry.
The stock is down significantly so far in 2025 as there have been data security concerns, and of course, uncertainty surrounding the broader AI industry. There have been reports of critical data security flaws in Palladyne’s AI systems which caused the stock to drop.
Moreover, the CTO of the company sold $392,441 worth of shares recently. The company is also quite unprofitable and trades with a frothy valuation.
The consensus price target of $15 implies 131.84% upside.
PDYN is down 47.31% year-to-date.
2. Quantum Computing Inc (NASDAQ:QUBT)
Number of Hedge Fund Holders In Q4 2024: 6
Quantum Computing Inc (NASDAQ:QUBT) is a quantum computing company.
The stock is down significantly so far in 2025 due to the broader AI industry starting to correct as investors turn sour. Microsoft canceled some of its data center leases and the spillover effect is partly why QUBT stock has declined.
Several class action lawsuits have been filed against Quantum Computing Inc., alleging that the company overstated its tech, progress on its thin-film lithium niobate (TFLN) foundry, and revenues from related-party transactions.
Furthermore, Microsoft’s Majorana announcement was a great breakthrough, but it failed to drive up long-term hype in quantum computing stocks.
As with most quantum computing startups, the company is dilutive and unprofitable.
The consensus price target of $8.5 implies 24.09% upside.
QUBT is down 58.58% year-to-date.
1. KULR Technology Group Inc (NYSEAMERICAN:KULR)
Number of Hedge Fund Holders In Q4 2024: 6
KULR Technology Group Inc (NYSEAMERICAN:KULR) is a thermal management company.
The stock is down significantly so far in 2025 as there has been a class action lawsuit alleging insider trading. The company has also gotten deeply involved in Bitcoin and has increased its BTC holdings to $60 million. This is 90% of cash reserves and the recent BTC decline has dragged down the stock.
Moreover, KULR filed for an automatic mixed securities shelf in January. There are also reports of challenges in the company’s thermal management tech.
On top of that, the cautiousness in both the broader AI industry and the crypto industry has caused twice the bearishness.
The consensus price target of $1 implies 32.43% downside.
KULR is down 58.73% year-to-date.
While we acknowledge the potential of KULR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KULR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks to Buy Now and Why These 15 E-Commerce Stocks Are Skyrocketing So Far In 2025
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