2 Struggling Stocks That Aren't Worth Buying on the Dip

C3.ai shares have fallen ~61% over the past year as revenue over the six months ending Oct. 31, 2025 declined 20% to $145.4 million and losses widened from $128.8 million (earlier two quarters) to $221.4 million, prompting a CEO change. The Trade Desk is down ~72% year-over-year amid slowing revenue growth (from 27% to 18% in the most recent quarter), recent CFO turnover (interim CFO named Jan. 26) and a still-elevated valuation near 40x trailing earnings, leaving both names vulnerable to further downside until fundamentals and management stability improve.

Analysis

Market structure: The immediate winners are AI infrastructure and large cloud/platform vendors (NVDA, MSFT, GOOGL) that capture scarce GPU/compute dollars; direct losers are pure‑play enterprise AI vendors (AI/C3.ai) and adtech specialists (TTD) facing demand pullback. Competitive dynamics favor scale — platform providers gain pricing power and can undercut smaller software vendors through bundled services, accelerating share shifts over 3–12 months. The C3.ai -20% revenue move over six months signals demand weakness versus persistent GPU supply appetite; single‑name implied vol should remain elevated, and risk‑off equity flows will pressure high‑beta small caps while widening credit spreads modestly.

Risk assessment: Tail risks include rapid privacy/regulatory action that compresses programmatic ad pricing, a large client churn at TTD, or execution failures at C3.ai leading to covenant/financing stress; any of these could knock 30–60% off current market caps in 6–12 months. In the next days to weeks expect outsized IV spikes and liquidity gaps around earnings; over quarters a consolidation/M&A wave is probable if growth stays negative. Hidden dependencies: customer ad budgets, GPU availability/cost, and CFO/board stability — each can nonlinearly amplify downside.

Trade implications: Implement asymmetric, time‑defined trades: favor long exposure to NVDA (beneficiary of AI spend) via 12–18 month LEAPs and tactical shorts in TTD and AI via 6–12 month puts sized to portfolio risk. Pair trades (long NVDA or MSFT, short TTD) capture relative secular demand; use option collars or staged entries to control gamma. Rotate out of small‑cap adtech/enterprise AI into mega‑cap infra over 3–12 months, and set objective exit rules (trim on +40% rallies or two consecutive quarters of margin erosion >200bps).

Contrarian angles: The crowd underestimates two outcomes: (1) programmatic ad spend stabilizes if privacy standards standardize, benefiting best‑in‑class adtech — a short squeeze risk for TTD; (2) C3.ai could become an acquirable asset at distressed multiples, capping downside. Reaction may be overdone for names with diversified revenue and sticky client relationships; avoid blanket selling and size shorts where governance or revenue trajectory clearly deteriorates.

Key Decisions for Investors

• Establish an initial 2% portfolio short position in The Trade Desk (TTD) via buying 6–9 month at‑the‑money to 10% OTM puts sized so maximum premium risk = 2% of portfolio. Add to the short up to a total 4% if next-quarter revenue growth falls below 15% or another senior finance executive departs.
• Allocate 3% of portfolio to Nvidia (NVDA) via 12–18 month LEAP calls (delta ~0.5–0.7) or outright shares for buy‑and‑hold; trim 50% on a +40% price gain or if NVDA reports two consecutive quarters of gross‑margin contraction >200bps. Hold 6–18 months to capture AI infrastructure re‑acceleration.
• Initiate a small 1–2% short on C3.ai (AI) using 12‑month puts or short equity, with a hard stop if credible acquisition rumors surface or if sequential revenue stabilizes (no further decline over two quarters). Increase to 3% only if revenue decline persists another ~20% over next two quarters.
• Execute a pair trade: go long 2–3% in a large cloud/advertising beneficiary (e.g., MSFT or GOOG) and short TTD per the sizing above; implement within 3 months and widen positions if ad budgets deteriorate further or TTD guidance is cut by >200–300bps.