What is Amazon, Microsoftand parent Google Alphabet have in common? They all have market valuations of over $1 trillion.
But there is something else. 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 he helped create. The company develops out-of-the-box, customizable AI solutions for hundreds of businesses across different industries, which can dramatically accelerate their adoption of cutting-edge technologies. 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.
C3.ai has world-class partners and customers
Cloud computing technology is essential for businesses that operate online in any capacity, and the top three cloud service providers are Amazon Web Services (AWS), Microsoft Azure, and Google Cloud. These platforms offer their customers hundreds of tools that can speed up business operations, and the ability to create artificial intelligence models is one of them.
AI is able to complete mundane tasks in a fraction of the time humans can, especially when they involve large volumes of data, so it makes sense that companies are calling for the integration of technology. This is where C3.ai comes in. Integrating their platform with AWS, for example, can allow an AWS customer to build an AI application 26 times faster than building it on AWS alone. C3.ai can reduce the need to write code by around 99%, where much of the time saving comes from.
Recognizing the value this creates, cloud providers are partnering with C3.ai to accelerate the adoption of AI in their customers’ businesses. Both Microsoft Azure and Google Cloud use C3.ai technology to enhance their cloud services. The partnership with Azure in particular has yielded at least $200 million in joint deals so far, including the acquisition of 16 new customers in the first quarter of fiscal 2023 (ending July 31).
In total, C3.ai now has 228 customers across multiple industries, from technology to manufacturing to oil and gas. The fossil fuel industry may not be an investor associated with cutting-edge technology like AI, but an oil giant Shell uses C3.ai to monitor over 13,000 pieces of equipment to improve safety, reduce emissions and predict failures that could otherwise lead to significant environmental disasters.
C3.ai is growing steadily with great potential
In fiscal 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% in fiscal 2023 due to the unfavorable economic climate, which is pushing companies to cut costs.
But in the fiscal first quarter, C3.ai increased its remaining performance obligations (RPO) by 58% to $458.2 million. Given that RPOs are generally expected to convert to revenue in the future, this is a sign that any slowdown in sales may only be temporary. Additionally, the company predicts that its addressable market opportunity could reach $596 billion by 2025, so it has a long streak of growth ahead.
C3.ai is not yet profitable, having lost $71.9 million in the quarter. This is one of the main reasons its stock has suffered as investors have avoided loss-making companies this year. But it has a strong balance sheet with over $900 million in cash, cash equivalents and short-term investments, which means it has plenty of dry powder to invest in growth and innovation.
C3.ai stock is cheap right now
After plummeting 93% from its all-time high, C3.ai’s market valuation currently sits at just $1.37 billion. Keep in mind the company’s cash balance of over $900 million, because that means investors are only valuing the actual business at around $500 million.
Considering the company’s outstanding RPOs alone, and without considering its huge future potential or partnerships with industry giants, this is a rock bottom valuation. Additionally, according to a McKinsey & Company report, artificial intelligence could add $13 trillion to the global economy by 2030, as up to 70% of organizations deploy the technology in some way. another one.
C3.ai is a pioneer in enterprise AI, so it deserves a lot more credit, and the sharp reduction in its stock price is a fantastic long-term buying opportunity.
Suzanne Frey, an executive at Alphabet, is a board member of The Motley Fool. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Anthony Di Pizio has no position in the stocks mentioned. The Motley Fool owns 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.