C3.ai, Inc. (AI): Short Seller Sentiment is Bearish on This AI Stock Under $50
We recently compiled a list of the 10 Worst Artificial Intelligence Stocks Under $50 According to Short Sellers. In this article, we are going to take a look at where C3.ai, Inc. (NYSE:AI) stands against the other AI stocks under $50.
The US artificial intelligence (Al) market size was pegged at US$123.07 billion in 2023, which should be able to compound at ~19.3% over 2024 to 2034 to touch US$851.46 billion, according to Precedence Research. While North America held over ~36.90% of the market share in 2023, the Asia Pacific market is anticipated to expand at the fastest CAGR of ~19.8% between 2024 and 2034.
The increased demand for automated and technologically advanced hardware and software products throughout end-use verticals, along with favorable government policies, continues to encourage the industries in North America to adopt Al. Over the past few years, significant investments by the tech giants in R&D fuelled technological advancements in various industries. Rapid penetration of digital technologies and the internet continue to contribute to the strong outlook for the global artificial intelligence market.
Latest Trends and Themes About Al
The 2 most important trends that stood out in 2023 were generative Al and electrification and renewables. As per McKinsey, the former saw a spike of ~700% in Google searches from 2022 to 2023, together with a strong increase in job postings and investments. This highlights the pace of technological innovation. Between 2023 and 2024, the size of the prompts that large language models (LLMs) can process, also known as "context windows," rose from 100,000 to 2 million tokens. Electrification and renewables were another trend that saw the highest investment and interest scores.
Even though several trends saw lower investment and hiring in 2023, experts believe that the long-term outlook remains strong. The continued focus on innovation by the enterprises and elevated interest in harnessing such technologies continue to demonstrate strong future growth prospects.
Innovation has widely been accepted in 3 trends, that form part of the "Al revolution" group. These include generative Al, Applied Al, and Industrializing machine learning. While Gen Al helps in creating new content from unstructured data (like text and images), applied Al helps in leveraging ML models for analytical and predictive tasks. Finally, industrializing machine learning ramps up and derisks the development of machine learning solutions. McKinsey reported that Applied Al and industrializing machine learning, aided by strong interest in gen Al, saw significant uptick in innovation. This was reflected in the surge in publications and patents between 2022 to 2023.
At the same time, electrification and renewable energy technologies are capturing strong interest, demonstrated by the news mentions and web searches. Their popularity stems from a surge in global renewable capacity, critical roles in global decarbonization efforts, and heightened requirements of energy security amid geopolitical tensions and energy crises.
Potential for Artificial Intelligence- Applied Al, Industrializing Machine Learning, and More
The impact of analytical Al technologies, such as applications of machine learning (ML), computer vision, and natural language processing (NLP), has been growing throughout sectors. McKinsey research believes that Al applications have the potential to unlock an economic value of $11 trillion - $18 trillion annually.
The Regulators and policymakers continue to take note of Al's increasing impact. For example, the European Parliament passed the unified EU Artificial Intelligence Act. Regarding real-life uses, Saudi Aramco was able to develop an Al hub to efficiently analyze over 5 billion data points per day from wellheads in the oil and gas fields.
Industrializing machine learning (ML), widely known as machine learning operations (MLOps), refers to the process of scaling and maintaining ML applications within enterprises. MLOps remain critical in developing, deploying, and maintaining gen Al solutions. This will enable ML algorithms to be dispatched quickly and effectively. Some sectors which are adopting industrialized ML practices are energy and materials and technology, media, and telecommunications.
Our methodology
To list the 10 Worst Artificial Intelligence Stocks Under $50 According to Short Sellers, we added 20 AI tickers to the Finviz screener and sorted them by short interest. Next, we narrowed our list of stocks by selecting the ones having high short interest and share prices below $50. Finally, the stocks were ranked in ascending order of their short interest.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A computer engineer debugging a complex AI application on a powerful workstation.
C3.ai, Inc. (NYSE:AI)
Share Price as of September 20: $23.25
Short % of Float (As of August 30): 28.69%
Number of Hedge Fund Holders: 18
C3.ai, Inc. (NYSE:AI) carries out operations as an enterprise artificial intelligence (AI) software company in North America, and internationally.
Short sellers believe C3.ai, Inc. (NYSE:AI) has concerns about its ability to accelerate growth. The key area of concern remains the slowdown in subscription revenue growth. It saw a growth of only 20% YoY in 1Q 2025 to $73.5 million compared to a ~41% jump in the previous quarter. This deceleration weighed over the company’s stock performance, mainly in the context of tightening corporate budgets for IT and software amid macroeconomic concerns. This also highlights the risks and challenges in expanding the customer base and converting its pilot programs to long-term contracts.
C3.ai, Inc. (NYSE:AI)’s optimistic outlook has not been translated into consistent and scalable revenue. C3.ai, Inc. (NYSE:AI) expects short-term pressure on gross margins as a result of the increased cost of pilot programs. Moreover, the investments to scale the business might impact its operating margins in the near term.
On the other hand, Wall Street analysts continue to remain optimistic about the company’s growth prospects. They believe that the deceleration in the subscription revenue growth appears to be temporary and that the focus should be on revenue growth. In 1Q 2025, its total revenue came in at $87.2 million, exhibiting an increase of 21% compared to $72.4 million a year ago. This marks 6th consecutive quarter of accelerating revenue growth, pointing to the growing adoption of its enterprise AI offerings.
C3.ai, Inc. (NYSE:AI) has made significant strides when it comes to expanding its footprint throughout the public sector. The company signed 25 agreements with the state and local governments. Its federal business continues to do well, as the segment represented more than 30% of its bookings. The company made a new and expanded deal with the US military. The launch of C3 Generative AI for government programs demonstrates the likelihood of strong growth.
Northland Securities upped the shares of C3.ai, Inc. (NYSE:AI) from a “Market-perform” rating to an “Outperform” rating, giving a price target of $35.00 on 30th May. The company was held by 18 hedge funds, as per Insider Monkey’s 2Q 2024 data.
Investment management company, Bireme Capital, recently released its fourth-quarter 2023 investor letter. Here is what the fund said:
“Our final new short position is in a company called C3.ai, Inc. (NYSE:AI). Originally named “C3 Energy,” C3.ai has changed its name multiple times based on whatever hot new trend they were supposedly capitalizing on. The “energy” theme was about smart grid and cap-and-trade. Then the firm changed its name to “C3 IoT” to attempt to capitalize on the Internet of Things buzz. After that trend fizzled out, the moniker was altered once more, with the company capturing the “AI” ticker in December 2020 – a savvy move if it wants to sell stock to credulous investors, but irrelevant to its business prospects. As Kerrisdale put it, the company is a “minor, cash burning consulting and services business masquerading as a software company.”
Overall AI ranks 1st on our list of the worst AI stocks to buy under $50. While we acknowledge the potential of AI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than AI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.