This Beaten-Down AI Stock: 1 Compelling Buy Signal vs 2 Brutal Sell Triggers

AI stocks aren't just soaring—some are getting crushed. Here's why one battered player might be worth a gamble, and why it could still crash harder.

The Bull Case: Pure Contrarian Greed

When everyone flees, sharks circle. This AI stock's plunge smells like classic oversold panic—the kind that creates generational entry points for those with steel nerves.

Reason to Bail: Innovation Debt

They're bleeding cash chasing rivals instead of dominating a niche. Another earnings miss could trigger a death spiral—VCs hate funding also-rans.

The Institutional Exit

Big money's already rotating toward crypto-AI hybrids. Traditional AI plays? They're so 2023—like trying to sell flip phones during the iPhone launch.

Final Take: Might bounce on a hype cycle, but good luck timing that perfectly. Most 'discounted' AI stocks just keep discounting... straight to zero.

Image source: Getty Images.

Reason to buy: It could usher in a paradigm shift

AI can help reduce expenses and costs in many areas; why not drug development? That's what Recursion Pharmaceuticals is betting on. The company utilizes an AI-powered algorithm to expedite the initial stages of the process.

Developing novel medicines is expensive, risky, and time-consuming. Most clinical compounds that make it to human clinical trials ultimately fail to reach the market. Despite significant technological progress over the past few decades, the business of drug development has only become more challenging.

By predicting which clinical compounds are the most likely to be safe and effective through an AI-based operating system that tests compounds against a library of human genes, Recursion hopes to increase the probability of success, cut drug development time, increase sales (since they WOULD make it to the market sooner, they would generate revenue for longer periods before dealing with patent cliffs), and increase profits.

If the company's vision becomes a reality, it would transform the entire pharmaceutical industry, and Recursion Pharmaceuticals could become incredibly successful in the process. That's an important reason to consider buying the stock.

Reason to sell no. 1: It has little to show for its efforts

Although Recursion Pharmaceuticals' grand vision looks exciting, the market needs more than just a vision to reward a stock. It needs results. And so far, the biotech company has little to boast about.

Although Recursion promises to transform the way drugs are developed, the company doesn't have a single medicine on the market yet. Worse, it doesn't even have any candidate in late-stage clinical trials.

Of course, that doesn't mean Recursion's approach doesn't work. Perhaps the company will be successful in the future. But in the meantime, the company's lack of tangible proof that it isn't just all talk has been a major reason why its shares have moved in the wrong direction.

Reason to sell no. 2: The competition will be fierce

Recursion Pharmaceuticals isn't the only company working on this project. It has at least a few competitors, some of which recently earned major wins.

For instance,recently entered into a partnership with privately held Superluminal Medicines, which also uses AI in its approach to making drugs. Eli Lilly and Superluminal will collaborate on using AI to develop weight management therapies in a deal that could be worth up to $1.3 billion for Superluminal.

Recursion Pharmaceuticals has signed similar partnerships, including with, another pharmaceutical leader. Further, Recursion also built the largest supercomputer in the pharmaceutical industry in collaboration with Nvidia.

Perhaps these factors give Recursion an edge in the race to master how to utilize AI in developing therapies, but the lucrative partnerships Lilly (and others) have attracted suggest the race isn't over, not by a long shot. And it's hard to predict who will emerge victorious.

Is Recursion's stock a buy?

Recursion Pharmaceuticals is a risky biotech stock. It boasts significant upside potential if it can execute near-flawlessly and prove that its approach is effective, but it could just as well continue moving in the opposite direction and destroy shareholder value over the next five years. That's why only investors comfortable with significant risk and volatility should consider the stock; even then, ensure it accounts for a small portion of your portfolio.