C3.AI (NYSE:AI) stock jumped 15% overnight after Nvidia (NASDAQ:NVDA) announced its blowout earnings.
AI stock is due to open this morning at almost $31/share after closing on May 24 below $28. The market capitalization jumped about $450 million to $3.575 billion. C3.AI stock hit a high of over $150/share soon after coming public in late 2020 but fell quickly and was trading below $11 at the start of this year.
Boom, Bust, Boom
C3.AI is primarily a defense contractor, although it was founded to serve the energy industry, and its home page features contracts from that sector. It was founded by Thomas Siebel, who previously sold his Siebel Systems to Oracle (NASDAQ:ORCL) and is worth an estimated $3.6 billion. Because of its defense contracts, I have previously compared C3.AI to Palantir (NASDAQ:PLTR).
The stock’s 2021 fall led many to stop believing in it, and it’s still down 70% from its high. The beginning of the Russia-Ukraine war failed to lift the stock, despite analysts’ predictions it would.
Before the Nvidia earnings hit, C3.AI was bracing for a Bloomberg report that criticized product delays and accused Siebel of micromanagement. The stock’s 11 analysts at Tipranks had an average “hold” rating on the shares, with most expecting the stock price to fall over the next year.
C3.AI is due to release earnings for the April quarter on May 31. Analysts are expecting revenue of about $71 million and a loss of 17 cents/share. The company managed 36% revenue growth in fiscal 2022 but lost almost $193 million as selling and administration expenses nearly doubled.
The company is trying to take advantage of the latest AI boom by launching a “generative AI” product through Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) Google Cloud marketplace.
AI Stock: What Happens Next
Expect some of the air to come out of the C3.AI balloon as investors recognize the limitations of the company’s current business model. Not all that glitters in a stock boom is gold.
On the date of publication, Dana Blankenhorn held long positions in GOOGL and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
