Home Investments This AI Stock Is Down 93%, Yet It’s Partnered With Amazon, Microsoft, and Alphabet. Is It a Buy?

This AI Stock Is Down 93%, Yet It’s Partnered With Amazon, Microsoft, and Alphabet. Is It a Buy?

by Ozva Admin

To do Amazon, Microsoftand father of Google Alphabet have in common? They all have market valuations of over $1 trillion.

But there is another thing. They all have a partnership with a small artificial intelligence (AI) company called C3.ai (AI -6.00%).

C3.ai is a leader in enterprise AI, an industry it helped create. The company develops ready-to-use and customizable AI solutions for hundreds of companies in different industries, which can materially accelerate their adoption of advanced technology. The stock is trading at a very attractive price right now after falling 93% from its all-time high. Here’s why investors should consider buying.

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Image source: Getty Images.

C3.ai has world-class partners and clients

Cloud computing technology is key for businesses operating online in any capacity, and the three leading providers of cloud services are Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. These platforms offer hundreds of tools to their clients that can speed up business operations, and the ability to build AI models is one of them.

AI is capable of completing mundane tasks in a fraction of the time humans can, especially when they involve big data, so it makes sense that companies are clamoring to integrate the technology. That’s where C3.ai comes in. Integrating your platform with AWS, for example, can enable an AWS customer to build an AI application 26 times faster than simply building it on AWS alone. C3.ai can reduce the need to write code by approximately 99%, which is where much of the time savings comes from.

Recognizing the value this creates, cloud providers are partnering with C3.ai to accelerate the adoption of AI in their clients’ businesses. Both Microsoft Azure and Google Cloud use C3.ai technology to enhance their cloud services. The partnership with Azure in particular has generated at least $200 million in joint deals so far, including acquiring 16 new customers in the first quarter of fiscal 2023 (ended July 31).

In total, C3.ai now has 228 clients across multiple industries, from technology to manufacturing to oil and gas. The fossil fuel industry may not be one that investors associate with advanced technology like AI, but the oil giant Shell is using C3.ai to monitor more than 13,000 pieces of equipment to improve safety, reduce emissions, and predict failures that could otherwise lead to significant environmental disasters.

C3.ai is constantly growing with a lot of potential

In fiscal year 2022 (ended April 30), C3.ai generated $252.8 million in revenue, up 38% year over year. The company anticipates a much smaller increase of 1% to 7% during fiscal year 2023 due to the unfavorable economic climate, which is pushing companies to cut costs.

But in the first fiscal quarter, C3.ai increased its remaining performance obligations (RPOs) by 58% to $458.2 million. Since RPOs are generally expected to turn into revenue in the future, it’s a sign that any slowdown in sales could only be temporary. Additionally, the company anticipates that its addressable market opportunity could reach $596 billion by 2025, so it has a long growth road ahead of it.

C3.ai is not profitable yet, having lost $71.9 million during the quarter. That’s a key reason its shares have suffered, as investors have shied away from losing companies this year. But it has a strong balance sheet with more than $900 million in cash, equivalents and short-term investments, which means it has plenty of dry powder to invest in growth and innovation.

C3.ai shares are cheap right now

After falling 93% from its all-time high, C3.ai’s market valuation stands at just $1.37 billion at the moment. Consider the company’s cash balance of more than $900 million, because it means investors are only valuing the actual business in the neighborhood of $500 million.

Considering only the company’s outstanding RPOs, and not taking into account its gigantic future potential or its partnerships with industry giants, that’s a rock-bottom valuation. Furthermore, according to a report by McKinsey & Company, artificial intelligence could add $13 trillion to the global economy by 2030, as up to 70% of organizations implement the technology in one way or another.

C3.ai is a pioneer in the enterprise AI space, so it deserves a lot more credit, and the deep discount to its share price is a fantastic opportunity to buy for the long haul.

Suzanne Frey, an Alphabet executive, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. antonio dipizio has no position in any of the mentioned stocks. The Motley Fool holds positions and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Microsoft. The Motley Fool recommends C3.ai, Inc. The Motley Fool has a disclosure policy.

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