Adobe's (ADBE 3.92%) stock has benefited from the renewed bullishness in the tech sector this year. Gaining more than 50%, the shares have pushed back up over $500. The company is also continuing to report double-digit growth. But it may not be smooth sailing for the stock because artificial intelligence (AI) could lead to both new opportunities and challenges for the business. And with an expensive valuation, is the stock still worth its premium?

Adobe's still generating double-digit growth

On Sept. 14, Adobe released its third-quarter results, demonstrating strong growth. Revenue of $4.9 billion for the period ending Sept. 1 was a new record high for the company and was up 10% year over year. It would have been even higher at 13% if not for unfavorable exchange rates. But the concern that investors may have is that the long-term trajectory remains a downward one.

ADBE Revenue (Quarterly YoY Growth) Chart

ADBE Revenue (Quarterly YoY Growth) data by YCharts

For the fourth quarter, the company projects that its revenue will be around $5 billion. That would be close to an 11% growth rate compared to sales of $4.5 billion in the year-ago period.

This is even as Adobe is excited about AI and its offerings. CEO Shantanu Narayen says that the company is "unleashing a new era of AI-enhanced creativity around the world with innovations across our product portfolio." While the AI offerings are promising, there don't appear to be any near-term payoffs from them just yet.

AI could harm Adobe more than it might help

What I like about Adobe's business is that the vast majority of its revenue is recurring; subscriptions accounted for a whopping 95% of its total sales last quarter. If you want the company's popular photo-editing software, Adobe Photoshop, be prepared to pay monthly for it. The same goes for its other products, including Adobe Acrobat. It's a good business model as long as users find value in the software.

But that's where I see potential issues down the road. AI could end up doing more harm for Adobe in the long run. Some AI-powered services generate images just from a user inputting a few words worth of text. It will get easier for people to not just edit photos but even make images.

That means more competition.

Plenty of open-source applications for photo editing are decent alternatives to Photoshop. Users may not want to go to the lengths to find them, but with AI growing in popularity and many apps now utilizing AI, even more mainstream applications could see greater adoption. Microsoft Paint, for example, is going to get AI-powered features soon, with the potential to generate images from text.

The moat, or competitive advantage that Adobe has, could be shrinking. And that means the whopping $54.99 per month the company charges for its Creative Cloud applications could look even more expensive than it already does now.

The stock's valuation doesn't help

Another issue I see with Adobe's stock is that although it has been hot this year, that has brought its valuation to 45 times earnings. That's below where it has been in previous years, but given the company's slowing growth rate, it might be difficult to justify the hefty price tag.

ADBE PE Ratio Chart

ADBE PE Ratio data by YCharts

At this kind of valuation and multiple, investors should expect much more from the business.

Investors should cash out on Adobe

If you've made money from Adobe's stock this year, now may be the time to consider selling. And if you haven't bought it, you're better off looking at other growth stocks. Adobe's products are too expensive, and as more competitive products hit the market, ditching its pricey subscriptions could give its consumers and businesses an easy way to trim their costs.

This stock is not worth a price-to-earnings multiple of 30, let alone 40 or 45.