In this article, we delve into the world of meme stocks and explore the insights provided by cutting-edge AI algorithms. These advanced systems have analyzed market trends, and company fundamentals, to identify seven meme stocks to sell according to AI.
As we examine each of these seven meme stocks, we will discuss the factors that led the AI to its conclusions, providing a look at the potential risks and drawbacks associated with these investments.
It should be noted that these conclusions should be taken with a large pinch of salt, as the direction of meme stocks are often influenced by investor psychology that AI can’t fully contextualize or process fully.
Still, it might be worth looking into these meme stocks to sell according to AI to get an objective perspective that’s not influenced by the emotions of greed and fear. For this article, I’ve used both the newest models of ChatGPT and Claude to find and process analysis of these meme stocks.
So here are seven meme stocks to sell according to AI.
AMC Entertainment (AMC)
AMC Entertainment (NYSE:AMC) was identified as one of those meme stocks to sell. ChatGPT said: “AMC has struggled significantly post-pandemic, with a dramatic decrease in share value due to declining theater attendance and significant debt. Despite attempts to revitalize with new movie releases, the company continues to face financial challenges and high shareholder dilution.”
ChatGPT also stated that: “AMC is consistently unprofitable, carrying a significant amount of debt, which has raised concerns about its long-term viability. The company has been described as “a dead company walking” due to its heavy debt load and ongoing financial losses. Despite efforts to raise capital through stock sales, the dilution of shares has negatively impacted shareholder value. AMC’s shares outstanding have increased dramatically from 12 million in January 2020 to over 250 million today.”
This could be a valid point since the brand’s shares outstanding have swelled over 91% year-over-year, and it is also struggling with liquidity issues thanks to its $8.99 billion in debt.
Carvana (CVNA)
Carvana (NYSE:CVNA) was another meme stock that AI thinks that investors should sell. It said: “Carvana experienced a massive short squeeze in 2023 but remains heavily shorted due to concerns about its high valuation and leveraged balance sheet. The online used car retailer’s fundamentals do not support its current stock price, making it a risky investment.”
It also noted that: “Despite recent improvements, Carvana is still projected to experience net losses in 2024 and 2025. This ongoing financial strain raises questions about the company’s ability to achieve profitability. The sell-side forecasts do not support a near-term turnaround, adding credence to the bearish outlook.”
Like with AMC, CVNA’s shares outstanding also grew at what I consider an unsustainably fast rate, climbing over 100% year-over-year at the time of writing. This somewhat blunts its share price rally over the same period of 135.38%, which is a grave warning sign.
Digital World Acquisition (DWAC)
Digital World Acquisition (NASDAQ:DWAC) is the next on the chopping block, according to AI. It said: “DWAC, the SPAC aiming to merge with Trump Media & Technology Group, has seen stock volatility linked to political events. However, the stock faces challenges with regulatory delays and uncertain business prospects, making it vulnerable to significant declines”
“There are considerable uncertainties about TMTG’s business prospects. Despite the speculative interest driven by Trump’s media presence, the actual performance and profitability of TMTG’s platforms like Truth Social remain questionable. Investors are concerned about the platform’s ability to compete with established social media giants and generate sustainable revenue,” Claude continued.
DWAC could be the ultimate vehicle for betting for (or against) Donald Trump’s presidency, and I envision that it will note record volatility in the weeks and months leading up to the election.
Its value then is tied to an event not explicitly tied to its main operating segments, which gives it a more speculative layer that other meme stocks lack, without a proportionate upside.
Hut 8 (HUT)
Hut 8 (NASDAQ:HUT) is a Bitcoin (BTC-USD) mining company that has found itself on AI’s radar as one of those meme stocks to sell. It said “Hut 8, a Bitcoin mining company, has faced scrutiny and allegations from short-sellers. With the recent decline in cryptocurrency prices and ongoing controversies, Hut 8’s stock faces substantial downside risks.”
“Hut 8 recently reported disappointing financial results for the first quarter of 2024, missing both earnings per share (EPS) and revenue estimates. The company posted an EPS of -17 cents, significantly below analyst expectations of 59 cents, and reported revenue of $51.74 million, which was 20.48% lower than the projected $65.07 million. This poor financial performance highlights ongoing challenges in achieving profitability.”
Despite these short-term weaknesses, my view is that the Bitcoin miners that will still be around in a decade from now will be those who can leverage scale effectively to reduce costs. Smaller miners like HUT are focusing on improving efficiency, which puts it at odds with this thesis.
As Bitcoin’s block rewards continue to halve, and input costs rise, miners are making a large bet that Bitcoin will continue to appreciate in value in order for their efforts to be worth it, along with increased efficiency of their mining rigs. Smaller firms may not be able to comfortably shoulder these risks as the centralization of the hash rate continues.
Virgin Galactic (SPCE)
Some players in the space industry are also not to AI’s liking, with Virgin Galactic (NYSE:SPCE) being noted as one of those meme stocks to sell.
“Virgin Galactic’s commercial space flights have generated minimal revenue, and the company is rapidly burning through its cash reserves. With low revenue generation and high cash burn, the company may run out of funds, posing a high risk for investors.”
It also notes that “In a strategic shift, Virgin Galactic plans to halt flights of its current suborbital vehicle, VSS Unity, by mid-2024 to focus resources on developing its next-generation Delta-class vehicles. This decision will reduce the frequency of flights, further limiting revenue in the short term. The company aims to redirect resources to ensure the Delta-class vehicles are operational by 2026, but this pivot involves substantial execution risk”.
SPCE has taken a hit ever since its main insider, Richard Branson, said he would no longer invest money into the company, stating that it “should have sufficient funds to do its job on its own,” citing its $1 billion balance sheet at the time he made that statement.
This may be seen as a prudent risk management strategy or a cause for alarm, but in either case it may reinforce the bear case to sell it as a meme stock.
Mullen Automotive (MULN)
Mullen Automotive (NASDAQ:MULN) is one of those contentious meme stocks and AI has caught wind of this. It said “Mullen Automotive reported significant losses and low revenue from its electric vehicle sales. The company’s financials are weak, with substantial cash burn and limited orders, making it a risky investment in the highly competitive EV market”.
“Recent partnerships and joint ventures announced by Mullen, such as with Global EV Technology and EV Technologies, have not significantly improved investor confidence. The lack of detailed financial information regarding these ventures adds to the uncertainty about their potential positive impact on Mullen’s business”.
Something that AI missed is that MULN’s shares outstanding increased 7,358.46% year-over-year, which would have diluted the ownership of existing investors to almost nothing. Recovering from that loss would require an astronomical return.
If this share dilution continues, there may be no point in investing in MULN, despite the promises of high capital gains.
Plug Power (PLUG)
Plug Power (NASDAQ:PLUG), another contentious pick, is the last meme stock that AI has identified outright as a company to sell.
“Plug Power, involved in hydrogen energy, has seen fluctuating stock prices due to market downturns and weak financial results. Concerns about its ability to finance future projects and continued shareholder dilution pose risks to its stock value.”
“Despite having cash and cash equivalents totaling $172.9 million, Plug Power’s ongoing operations and investments result in significant cash outflows. This high cash burn rate necessitates continuous capital raising, which could dilute shareholder value”.
PLUG is certainly a polarizing name in the hydrogen industry. It has recently shook off fears that it will ot remain a going concern, but its high rate of cash burn remains an issue in a speculative industry.
The meme stock is more risky than many of the names listed here, as it is flirting with bankruptcy more closely, and thus should be invested in only by those with an extreme risk tolerance.
On the date of publication, Matthew Farley did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.