Mark your calendars for June 22, as this is when C3.AI will be reporting its quarterly results. The AI stock is currently trading in pre-market at approximately $45 per share, with a market capitalization of over $5 billion on fiscal 2023 revenue of $266 million. This is not unusual as other AI stocks like Palantir Technologies (NASDAQ:PLTR) are also trading at double-digit multiples to revenue.
It is currently the biggest tech companies that have benefitted the most from the AI boom. However, very few examples of clear business success have appeared thus far. Some companies involved in generative AI today may justify huge valuations. Amazon (NASDAQ:AMZN) traded at nearly $300 during the peak of the 1990s Dot-Com Bubble, and those who remained with it afterward saw huge profits.
But most companies from that era disappeared. Even those that survived, like Cisco Systems (NASDAQ:CSCO) and Intel (NASDAQ:INTC), are no longer what they were.
C3.AI is one of the few companies that benefit from CEO Thomas Siebel’s experience of going through that era and coming out on the other side. He did this by getting into the next big boom, database-driven applications, and founded C3.AI after selling that business, Siebel Systems, to Oracle (NASDAQ:ORCL).
Oracle is another business from that era that has since prospered. It didn’t return to its year 2000 peak of $45/share until 2018. However, it now trades at $125 after investing heavily in cloud data centers. Oracle would also be a good candidate to buy C3.AI on weakness.
Most C3.AI revenue comes from what is called the Machine Internet. Improved industrial processes through the use of sensors, networks, and software are a proven niche. C3.AI reportedly earns almost one-third of its revenue from Baker Hughes (NYSE:BKR), the oilfield company. Since March, when short-seller Kerrisdale Capital accused C3.AI of irregularities, the stock has risen 56%, with most of the gain coming in the last month.
As with every major business trend, there will be failures and successes for the ride. C3.AI’s performance in the future is not yet clear. Nonetheless, for now, investors seem to have confidence in its leadership.
