Prior to 2023, many financial traders had never heard of enterprise artificial intelligence company C3.ai (NYSE:AI). Then, the machine-learning boom got underway and AI stock rallied quickly.
That’s exciting, but it’s important to weigh the bullish and bearish sides of the argument if you’re considering investing in C3.ai.
C3.ai was deeply immersed in the machine learning industry before many of the bandwagon jumpers got on board. Now, it seems like every technology company wants to get involved in AI.
This puts C3.ai in a position to grow along with a fast-accelerating market. Therefore, it’s fine to hold a few shares of AI stock if you want to. Just be aware that the risk-to-reward scenario isn’t perfect for C3.ai and its stakeholders in 2023’s second half.
C3.ai Taps Into an $800 Billion Opportunity
Wedbush analyst Daniel Ives is optimistic about C3.ai’s future prospects. Ives envisions an “$800 billion opportunity over the next decade” with AI. Also, he sees C3.ai as being “at the center of the AI gold rush taking place.”
Ives assigned an “outperform” rating and an ambitious $50 price target on AI stock. He still seems to feel that C3.ai has some proving to do.
“Now it’s all about execution and proving the skeptics wrong quarter by quarter as C3 looks to capitalize on this burgeoning AI opportunity over the coming years,” Ives said.
Indeed, while the machine learning industry is set for growth, C3.ai isn’t a perfect pick. Spruce Point Capital founder Ben Axler warned that C3.ai “has done nothing but burn through $150 million, almost $200 million of cash since we first outlined our concerns about the company.”
It’s problematic that C3.ai’s net loss deepened year-over-year in the company’s most recently reported quarter.
AI Could Fall Before It Takes the Next Leg Up
If the machine learning market grows during the next few years, AI stock will probably gain value during that time. In the near term, however, the stock may be vulnerable to a pullback after the huge rally of 2023’s first half.
Valuation concerns may have prompted Oppenheimer analyst Timothy Horan to refrain from recommending an investment in C3.ai.
Horan is waiting for “viral growth to ramp” in the generative AI market, and for the time being, asserts that the “risk/reward is relatively neutral” for investors of C3.ai.
Horan “can’t move to an Outperform rating on C3.ai just yet, despite the long-term promise, without seeing a major step up in growth.”
Overall, Wall Street is neither very bullish or bearish about C3.ai. Out of 11 prominent analysts covering AI stock, most them have issued a “hold” or equivalent rating.
No Need to Go All-in on AI Stock
C3.ai’s valuation got pumped up earlier this year. This occurred even though the company’s bottom-line financials aren’t stellar. The last thing you want to be is a price chaser, no doubt. So, it’s not wise to over-leverage yourself on C3.ai shares now.
If you’re super-bullish on the AI industry and want pure-play exposure, it’s fine to invest in C3.ai. AI stock gets a “B” grade as it has good long-term potential.
Just don’t be surprised if the stock hits some volatility along the way.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
