This will be a big year for artificial intelligence (AI).
Rapid improvements in technologies such as machine learning algorithms, natural language processing, and AI chips make AI systems more capable, efficient, and versatile. Unsurprisingly, an increasing number of new AI-powered applications and services — such as ChatGPT — are debuting in the market.
Investors are, understandably, rushing to join the AI trend by investing in companies. Nvidia And Palantir. But there's a lesser-known company worth keeping an eye on: C3.ai (NYSE: AI ).
An early mover in the AI software industry
When ChatGPT released its service by the end of 2022, it took the tech world by storm. Until then, AI was a nice (but not necessary) feature that didn't make it into the minds of most corporations.
But thanks to advances in generative AI, ChatGPT and a series of other AI apps show how AI can change how we do important things in life, like writing, working and code. More importantly, it highlights the existential threat to those who choose to ignore it, be they individuals or corporations.
While most weren't ready for it, C3.ai is preparing itself for the arrival of the AI era. Founded in 2009 by Thomas Siebel (who previously founded and sold his customer relationship management company Siebel Systems Oracle), C3.ai is an enterprise AI software company. It primarily provides its services under the Software as a Service (SAAS) business model.
C3.ai mainly provides its services in two categories. The first category is the C3 AI Suite, the core technology platform that allows clients to rapidly design, develop, and deploy enterprise AI applications. The platform helps clients build tailored applications to meet their specific needs.
The second category is C3 AI Applications, a set of ready-made applications that can be installed and used immediately. These applications are typically industry-specific apps that were previously designed and developed using the C3 AI Suite, but can be implemented across different companies within the same industry.
By coming early in the industry and investing a large amount of money (the company accumulated a loss of $1.1 billion), c3.ai has made solid progress over the years, securing large companies as their clients. Is. Shell, Astra Zeneca, Baker HughesCoach, and the US Air Force are examples of its customers.
C3.ai recently reported some solid progress.
When C3.ai went public in 2020, it posted an impressive 71% revenue growth in the fiscal year ended April 30, 2020. Investors expected the company to grow at these high rates, but it did not. Instead, revenue growth has slowed since then, hitting a low of minus 4 percent in the fiscal third quarter ending April 30, 2023.
But since then, C3.ai has made a solid comeback as revenue growth reached 20% in the latest quarter. Revenue reached a new high of $87 million, 92% of which was from subscription revenue.
The tech company also made notable progress in key metrics. For example, it won 191 contracts in fiscal year 2024, a 52 percent year-over-year increase. User engagement also increased by 70 percent as demand for AI applications increased, particularly for applications related to generative AI.
Thomas Seibel, CEO and Chairman of C3.ai commented:
Demand for enterprise AI continues to intensify, and our first-to-market advantage in enterprise AI positions us well to take advantage of it. Our enterprise AI applications have been adopted across 19 industries, increasing market diversity. Our federal revenue grew by over 100% year over year. The interest we are seeing in our creative AI applications is staggering.
Growing awareness and interest in AI software has given the entire industry a major push in 2023, with another leading AI software company, Palantir, reporting solid growth in the most recent quarter. If this trend continues, it wouldn't be surprising to see C3.ai reporting even stronger numbers in the coming quarters.
But there are still many uncertainties to consider.
There are many reasons to love C3.ai. It has an early stage advantage and operates in a vast industry valued at $271 billion in 2024. Still, there are uncertainties to consider.
Investors should consider whether the current interest in AI is a sustainable trend or one that will eventually fade in the coming quarters. Will this be a game changer, or will it be like the 2022/2023 Metaverse hype?
Also, C3.ai stock trades at a rich valuation with a price-to-sales (PS) ratio of 11.1 times. For a small and unprofitable company, such value is higher if we compare it with well-established companies. the alphabetwhich has a P/S ratio of 7.5 times.
In other words, while C3.ai is a company worth paying attention to, investors should consider the risks involved before committing their hard-earned capital.
Should you invest $1,000 in C3.ai now?
Before buying stock in C3.ai, consider this:
gave Motley Fool Stock Advisor The analysis team only indicated what they believed. 10 Best Stocks For investors to buy now… and C3.ai was not one of them. 10 stocks that made the cut could generate monster returns in the coming years.
Consider when Nvidia This list was created on April 15, 2005… If you invested $1,000 at the time of our recommendation, You will have $771,034.!*
Stock Advisor Provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks every month. gave Stock Advisor There is a service More than four times S&P 500 Returns since 2002*.
View 10 Stocks »
*Stock Advisor returns on July 8, 2024
Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. Lawrence Enga has no position in any stocks. The Motley Fool has positions in and recommends Alphabet, Nvidia and Palantir Technologies. The Motley Fool recommends AstraZeneca Plc and C3.ai. The Motley Fool has a Disclosure Policy.
Focusing on 1 AI stock for the rest of 2024. Spoiler alert: It's not Nvidia or Palantir. Originally published by The Motley Fool.