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Uncovering Hidden Gems in the Artificial Intelligence (AI) Industry

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The Giants in the AI Arena

The tech world abounds with mentions of Nvidia, Microsoft, and Amazon when discussing artificial intelligence (AI). These titans spearhead the race to harness the power of AI, each showcasing unique approaches to solidify their dominance in this burgeoning sector.

With a staggering valuation of $2.2 trillion, Nvidia leads the pack by manufacturing the most robust graphics processing units (GPUs) for AI workload optimization in data centers. A whopping $1.5 trillion of this valuation increment materialized in the past year alone, propelled by the skyrocketing demand for these chips.

Microsoft, on the other hand, made a bold move by injecting $10 billion into ChatGPT developer OpenAI last year. Leveraging the startup’s cutting-edge GPT-4 models, Microsoft meticulously integrates AI into its full suite of products. From Word to Excel, users can now access an optional AI assistant, Copilot, while developers can tap into advanced AI models on the Azure cloud platform to craft bespoke applications.

Meanwhile, Amazon is strategically positioned to commandeer the trifecta of AI realms. By crafting proprietary chips, constructing vast language models (LLMs), and innovating AI-driven applications, Amazon secures a formidable stance in the industry. Moreover, the retail giant exploits AI across its e-commerce platform to propel sales and facilitate advertisers in widening their consumer reach.

A digital render of a computer chip with AI inscribed in the center, on a blue background.

Image source: Getty Images.

Unveiling a Hidden Jewel in the AI Universe

Though Nvidia, Microsoft, and Amazon reign as veterans of the $1 trillion cohort, an obscured gem in the AI realm beckons attention.

C3.ai (NYSE: AI), despite its relatively subdued recognition, cunningly positioned itself as the globe’s premier enterprise AI entity upon its inception in 2009. C3.ai pioneers AI-as-a-service by furnishing corporations with preeminent, off-the-shelf AI applications to expedite their assimilation of AI technology.

As the current evaluation pegs C3.ai at $3.1 billion, the firm stands poised for substantial expansion over the long haul as AI’s potential to bolster the global economy by trillions, as per Wall Street’s initial prognostications. The moment may be ripe for investors to delve into the compelling narrative of C3.ai.

A Beacon in the AI Revolution

C3.ai boasts an impressive catalog of over 40 off-the-shelf AI applications catering to 10 distinct sectors, with the adaptability to customize solutions to individual entity requirements. In finance, C3.ai’s anti-money laundering tool outshines traditional methods by identifying three times more dubious transactions, while its smart lending app truncates borrower assessment time by 30%.

Not to be outdone, the oil and gas sector leverages C3.ai’s reliability suite to prognosticate equipment failures, thereby slashing costs and averting environmental calamities.

Moreover, C3.ai proffers a generative AI tool for enterprises to extract maximal value from data repositories. The tool, compatible with leading cloud platforms like Amazon Web Services and Alphabetβ€˜s Google Cloud, allows firms to integrate their preferred LLM to tailor solutions according to specific exigencies. It can function as a virtual assistant or a potent analytics instrument.

During the recent fiscal Q3 of 2024 (ended Jan. 31), C3.ai clocked 445 customer engagements, marking an 80% surge from the previous year. The company retails its applications independently while also facilitating sales in union with Amazon Web Services, Microsoft Azure, and Google Cloud. Fractionally more than half of the 50 deals sealed by C3.ai in the quarter materialized through collaborative efforts with its partners.

Resurgence in Revenue Growth

Approximately two years ago, at the onset of C3.ai’s fiscal 2023, the company embarked on a revenue model transformation. Moving away from subscription-based pricing, which entailed intricate negotiations and prolonged customer onboarding, C3.ai shifted to a consumption model. This tweak allows customers to remunerate based on usage, expediting sign-ups and bestowing greater flexibility.

Though the transition initially resulted in a revenue growth deceleration throughout fiscal 2023, the company anticipates a resurgence. The latest financials showcased a record Q3 inflow of $78.4 million, denoting an 18% surge β€” the swiftest growth observed in over a year. The financial trajectory, as envisioned by C3.ai’s models, indicates a sustained acceleration in the foreseeable future.

The Investment Case for C3.ai

A point of note for prospective investors is C3.ai’s ongoing lack of profitability. Despite incurring a $72.6 million loss in Q3, the figure dwindled to $15.8 million on a non-GAAP basis, which excludes one-off expenses like stock-based compensations. This blemish, coupled with the previous growth slackening, positions C3.ai shares 83% below the zenith they reached during the tech fervor of 2020 (albeit during a period of inflated valuation).

As the company boasts over $723 million in cash, equivalents, and short-term investments, it possesses ample cushion to absorb comparative losses for years. Yet, the onus lies on C3.ai to demonstrate its journey towards profitability, with the consumption model anticipated to alleviate customer acquisition costs.

CEO Thomas Siebel likens the AI domain to the internet and smartphone existence’s dawn. Forecasts from Wall Street propose AI’s potential contribution of anywhere from $7 trillion to $200 trillion to the global economy in the unfolding decade.

If C3.ai captures even a fraction of this value, investors stand to reap substantial rewards. Furthermore, with C3.ai’s current business upswing, the present moment might offer an opportune juncture to delve into C3.ai.

While Nvidia, Microsoft, and Amazon stand out as stellar AI stock picks, investors venturing beyond the familiar horizons may find solace in choosing C3.ai for the long haul.

Is a $1,000 investment in C3.ai worth it now?

Before contemplating C3.ai investment, heed this:

The Motley Fool Stock Advisor analyst squad has discerned the 10 best stocks they deem ripe for investment at present, with C3.ai not making the cut. The highlighted 10 stocks hold the potential for sizable returns in forthcoming years.

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*Stock Advisor returns as of April 1, 2024

John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, serves on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is likewise on The Motley Fool’s board of directors. Anthony Di Pizio holds no positions in any of the stocks mentioned. The Motley Fool has holdings in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool commends C3.ai and suggests the following alternatives: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool operates under a disclosure policy.

The views and opinions articulated herein are those of the author and may not correspond with those of Nasdaq, Inc.

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