AI stock plays if you can't afford Nvidia

C3.ai shares plummeted after its outlook missed estimates. Yahoo Finance Tech Editor Dan Howley breaks down the company's latest earnings. Howley also discusses the run in AI stocks, including some names to know if you some of them may be too expensive for an investor's budget.

Video transcript

- Well, artificial intelligence software developer C3 AI reported its fourth quarter earnings after the bell on Wednesday. Despite beating expectations on the top and bottom lines, shares are plummeting down about 12% at the moment. That's after the company's full-year revenue outlook came in shy of Wall Street estimates.

Yahoo Finance's Tech Editor Dan Howley is here to weigh in on that. So Dan, what stood out to you most in the company's quarterly earnings?

DAN HOWLEY: Yeah, I think, look, they beat on the top and bottom line. It's really got to do with the guidance going forward. And I think that people are looking at NVIDIA, how they really blew up with their forward-looking guidance for the next quarter and the year, and said, well, then every company has got to blow up like that if they're dealing with AI.

And I think, when you look at what C3 AI said, they said 2024, they're expecting between $295 million and $320 million in revenue. Analysts were looking for a $321 million for the full year. And the stock just got hammered from there. At one point, it was down 13%, shortly after the earnings announcement. Right now, it's down almost 13% again.

And then, just take a look, though, at how it's performed over the year so far. Year to date, at least as of before their earnings yesterday, they were up 252%. Right now, they're up 211%. NVIDIA, as of yesterday, they were up 162%.

So these guys have just outdone NVIDIA year to date, not obviously full year-- yeah, you could see NVIDIA up 168%. But they've outdone or outpaced NVIDIA year to date as far as overall stock performance goes. And I think people are looking at that and saying, well, if they've got AI in the name, they've got to be really great with AI then. And then, the guidance comes in later, and people start freaking out.

So I think this comes down to people playing the AI hype card really, really hard. And I think we're going to continue to see stuff like this because, look, the technology is there. It still has to kind of filter down into the rest of the economy and the business world. This is still new stuff, so we're just kind of waiting on that.

Plus, this isn't exactly a chipmaker or anything. They work with government contracts and things along those lines. So they may not ever really blow up to what people may be expecting. But I think part of it may have to do with the fact that they have AI as their ticker symbol. [LAUGHS]

- I mean, it certainly helps. Dan, you have a lot of investors eager to play in the AI space, perhaps seeing these names with AI in it, not really sure what to do. But then, what if you can't afford to invest in NVIDIA? What do you think the next play for AI is?

DAN HOWLEY: Yeah, there's a number out there right now. And just to throw two names out there, we have Marvell, and we also have Broadcom. Those are two companies I think that a lot of people look at and say, OK, these are AI plays. They have AI capabilities.

They're also outside of AI. They have their own other offerings. Obviously, Broadcom made big news talking about providing chips to Apple or technology to Apple for 5G technology and things like that.

But these are companies that either offer different types of switches that are required for connecting different AI systems or custom AI chips to big providers like a Google. Google is using one of Marvell's chips to power some of its technologies on the AI side. So there's still other companies out there that are capable of doing this. We've had Qualcomm talking up AI a lot, Arm talking up AI a lot.

So there are certainly businesses out there that aren't NVIDIA. NVIDIA just happens to be the one that's invested so heavily over the years. And they are a GPU maker. And it just so happens that GPUs are great at AI. And so that's why they're really crushing it. Other companies, though, still out there in the AI space.

- All right, so still opportunities to be had if you know where to look. Thank you so much. Yahoo Finance Tech Editor Dan Howley, thanks again.