Rewrites throughout, updates shares at market open in paragraph 1, adds analyst comment in paragraphs 6-7

By Kritika Lamba and Jaspreet Singh

Feb 13 (Reuters) - Pinterest PINS.N shares tumbled 21% to their lowest since the 2020 pandemic lows after the image-sharing platform's weak forecast showed that major advertisers are pulling back spending just as AI tools threaten to upend the market.

The company's quarterly revenue projection fell short because of lower marketing spend by large U.S. retailers grappling with tariff-induced business uncertainty.

Pinterest is also rebuilding its sales teams after company-wide layoffs of under 15% last month that were meant to power its AI pivot but fell flat with investors.

Competition for advertising dollars is also heating up as OpenAI tests ads in ChatGPT, and Google rolls out features that allow consumers to buy products while looking for AI-powered answers in search and its Gemini chatbot.

That adds to a crowded field where brands are already favoring established players such as Meta META.O and TikTok, which now exists as a separate entity in the U.S.

Pinterest's results were also in contrast to the upbeat performances from Snap SNAP.N and Reddit RDDT.N.

"Pinterest is constrained by legacy monetization models amid a rapidly evolving AI landscape," said Lenny Zephirin, CEO of market research firm Zephirin Group.

The platform "retains some differentiation through visual discovery and shopping-focused ad formats, but these advantages are unlikely to fully offset competitive pressures," Zephirin added.

If the losses hold, this would be the second straight quarter Pinterest shares have fallen more than 20% after its quarterly results.

The company is set to lose more than $2 billion from its market value of $12.52 billion.

The company trades at 9.49 times the estimates of its earnings for the next 12 months, compared with 9.42 for Snap, 29.99 for Reddit and 21.41 for Meta.

At least 24 brokerages cut their price targets on Pinterest's stock.

"We'll probably see AI-powered Pinterest clones from Meta, OpenAI, and Amazon soon," Bernstein analysts said in a note.

(Reporting by Kritika Lamba and Jaspreet Singh in Bengaluru; Editing by Maju Samuel and Tasim Zahid)

((Jaspreet.Singh@thomsonreuters.com; on X @i_jass;))