It’s been an interesting year for enterprise artificial intelligence (AI), to say the least. Even though the market was obsessed with machine learning in 2023, AI stock made big moves in both directions. This is likely to persist in 2024, but if you can handle the ups and downs, then feel free to take a long-term share position in C3.ai.) company C3.ai (NYSE:
When I say “long-term,” I mean through the rest of the decade. Interestingly, InvestorPlace contributor Joel Baglole identified C3.ai stock as a possible target for 1,000% growth by 2030. I’m not quite that ambitious, but it does make sense to have a multi-year timeline if you plan to invest in C3.ai.
Issues and Opportunities With AI Stock
Conservative investors might be bothered by C3.ai stock’s volatility, along with its enormous year-to-date gains. Really, no one should assume that 2024 will resemble 2023.
Another issue with C3.ai is that the company remains unprofitable. The company lost 59 cents per share in the second quarter of fiscal 2024 on a GAAP-measured basis. On the other hand, that’s a slight improvement over the loss of 63 cents per share in the year-earlier quarter.
Furthermore, C3.ai CEO Thomas Siebel observed growth his company’s revenue. Specifically, Siebel stated, “In the trailing four quarters, we have seen top line year-over-year revenue growth increase from -4% in Q3 FY23, to 0% in Q4 FY23, to 11% in Q1 FY24, to 17% in Q2 FY24.”
Hopefully, C3.ai can continue this positive pattern. C3.ai reported $73.2 million in revenue for Q2 FY2024; for the current quarter, the company expects to generate revenue of $74 million to $78 million.
High Hopes for C3.ai
In its most recent quarterly press release, C3.ai came out swinging with big ambitions. In particular, C3.ai’s management declared that the company is “well-positioned to accelerate growth, gain market share, attain sustainable non-GAAP profitability and establish a market-leading position globally.”
It’s normal for a company’s management to express high hopes in a quarterly earnings release. Consequently, investors should take all statements with a grain of salt and assume that AI stock will take a massive moonshot soon.
Instead, I encourage you to extend your time horizon to the end of the 2020s. C3.ai acknowledged that it “plans to further accelerate its investment in generative AI, deepening its investments in lead generation, branding, market awareness, and customer success.” This might yield outstanding results for the company in the long term.
In the near term, however, it will cost a lot of money and dent C3.ai’s bottom-line results. According to C3.ai’s press release, “Goldman Sachs predicts that AI could increase corporate profits by 30% in the next decade.” Again, the idea is to consider what will happen years from now. There’s no point in obsessing over whether C3.ai’s market capitalization will explode in the next 12 months.
C3.ai Stock: It’s a Waiting Game That You Can Win
Conservative investors might choose to hold their noses and buy C3.ai stock, fully aware of its volatility. They’d also have to be willing to forgive C3.ai’s unprofitable profile. Moreover, cautious investors might take issue with C3.ai’s willingness to spend large amounts of money.
Yet, it appears that C3.ai is spending money now to develop its resources for the remainder of the decade. Hence, even cautious investors can still hold AI stock as long as they’re willing to hold it and wait. The big returns might not come until 2030, so be patient and don’t get shaken out by sharp share-price moves.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.