Asked about BigBear.ai (BBAI), TD Ameritrade Senior Markets Contributor George Tsilis told Schwab Network today that BBAI has struggled in recent weeks partly because "the appetite for the high beta, unprofitable companies in the AI space are challenged right now." What's more, like Palantir (PLTR), BBAI is being penalized by its reliance on Washington for a great deal of its revenue.

Additionally, investors are generally quite fearful, while overall sentiment is low, he stated.

DC's Budget Outlook Is Weighing on PLTR, BBAI

As an AI-powered intelligence company that obtains most of its revenue from U.S. defense agencies, BBAI is facing difficulties, said Tsilis, likely alluding to Washington's budget cuts. He indicated that PLTR is facing a similar challenge at this point.

On the other hand, he said that BBAI can benefit from the federal government's increased focus on protecting the border. "Border security is essentially where this company's revenue stream is focused," he noted.

BBAI's Major Difficulty

"But the problem (for BBAI) now is that there's no appetite for growth stocks" that aren't profitable, Tsilis explained. Investors have become more realistic and are starting to care about fundamentals, he noted.

While we acknowledge the potential of PLTR, 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 PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.