Artificial intelligence (AI) is white-hot, and one way to ride its growth up to the top is through a long position in C3.ai (NYSE:AI) stock. I am bullish on AI stock not because it’s trendy now but because the company is an industry leader with best-in-class products.
Surely, by now, you’ve seen the headlines about ChatGPT, the chatbot developed by OpenAI. It’s a popular program now and has growth prospects, but you can’t invest directly in ChatGTP or OpenAI. Microsoft (NASDAQ:MSFT) is said to be investing $10 billion in OpenAI, but MSFT stock certainly isn’t a pure, fully-focused play on machine learning software.
Besides, let’s be honest – Microsoft stock is fine, but it isn’t likely to double, triple, or more in the near future. If you’re willing to accept more risk but a greater potential reward, take a look at AI stock and see if you agree with me that it has much more room to run.
The AI Market is Poised for Explosive Growth
Don’t get the wrong idea here. I’m certainly not recommending that anyone should invest in machine learning, and therefore in C3.ai stock, just because AI is white-hot right now. Rather, investors should first be convinced of the industry’s rapid growth prospects and then focus on C3.ai, specifically.
So, here’s the evidence. Research firm Fortune Business Insights projects that the global AI market will expand from $387.45 billion in 2022 to nearly $1.4 trillion by the year 2029. Moreover, the firm envisions this market exhibiting a compound annual growth rate (CAGR) of 20.1% from 2022 through 2029.
That’s not a guarantee, but there’s certainly high conviction in the machine learning industry here. Additionally, multiple world governments are apparently ready to lend a hand to the AI market. Not long ago, the White House signed an agreement with the EU “to further research on artificial intelligence (AI), computing, and related privacy-protecting technologies.”
Most likely, the U.S. and nations in the EU consider AI development to be not only a financial priority but a matter of national security as well. All of this government support for machine learning bodes well for the industry and for a purely AI-focused company like C3.ai.
C3.ai Stock is a Fast Mover but for Valid Reasons
Again, if you want to play it (relatively) safe and only get partial exposure to AI, go ahead and take a look at Microsoft stock. On the other hand, if you can tolerate some volatility, take a look at the chart of C3.ai stock and consider the reasons why it’s putting the short-sellers out of commission.
Sure, the White House and EU’s support of AI are contributing factors. Plus, the trading community is focused on the popularity of ChatGPT right now. There’s more to the story, though. Consider, for example, that C3.ai grew its subscription revenue 26% year-over-year during 2023’s fiscal second quarter.
This was possible because so many public and private entities turned to C3.ai for enterprise-scale AI applications. The company has struck deals with the Missile Defense Agency (which, by the way, recently awarded C3.ai three new orders), the U.S. Air Force, and Microsoft – that’s right, the same company that people currently associate with OpenAI.
The company isn’t currently profitable; I’ll acknowledge this fact. However, profitability might be achieved in the near future if C3.ai keeps growing its revenue.
In addition, the company is likely to continue winning lucrative contracts because C3.ai is relentless in developing new, innovative products. For instance, the company just launched its C3 Generative AI Product Suite. This seems to offer some ChatGPT-adjacent services, including “a natural language interface to rapidly locate, retrieve, and present all relevant data across the entire corpus of an enterprise’s information systems.”
Is AI Stock a Buy, According to Analysts?
Turning to Wall Street, AI stock is a Hold based on two Buys, two Holds, and three Sell ratings. Interestingly, the average C3.ai stock price target is $16.50, implying 40.1% downside potential.
Conclusion: Should You Consider AI Stock?
By now, you should at least be convinced that machine learning isn’t just a passing fad. It has international government support, and big-money businesses like Microsoft are getting involved in AI.
In the final analysis, just because AI stock recently went up a lot, this doesn’t mean it can’t run much higher. So, feel free to take a look at C3.ai, and if your portfolio can handle some volatility and risk, consider buying some shares.
