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C3.ai Stock Faces Setback as AI Hype Wanes, Shares Plummet 11%

AI hype

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TL;DR

  • C3.ai stock dropped 11%, hitting $28.18, the lowest since May.
  • AI excitement fades despite Nvidia’s success; AMD and Microsoft are also affected.
  • Concerns over C3.ai’s worth growth as AI momentum slows.

 

In a stark reversal, C3.ai (NYSE: AI) witnessed a sharp decline in its stock price, with a plunge of over 11% on Thursday. This dip has pushed the shares to a low of $28.18, marking the lowest level since May 25th. The broader picture reveals a significant drop of more than 41% from its peak this year.

AI hype loses steam

The latest buzz surrounding artificial intelligence (AI) took a hit as C3.ai’s shares experienced a notable downfall. Despite Nvidia’s impressive performance, where the company’s revenue and profitability soared on the back of heightened demand for AI chips, concerns about the industry’s trajectory have come to the forefront. Notably, this unease has manifested in the decline of stocks belonging to major players such as AMD, Microsoft, AITX, and C3.ai.

C3.ai’s downward trajectory

C3.ai’s shares have been in a downward spiral since reaching their pinnacle in June this year. This trend can be primarily attributed to concerns about the company’s valuation and growth prospects in the new AI landscape. From a valuation perspective, C3.ai currently holds a market capitalization exceeding $3.7 billion. While the company’s annual revenue increased from $183.2 million in 2021 to $252 million in 2022.

 Its performance remains overshadowed by a continuous stream of annual losses. The cumulative loss over the past four quarters exceeded $269 million. This financial standing raises questions about the company’s perceived overvaluation, evident in its price-to-sales (P/S) multiple of 13.90x. In contrast, more fairly valued firms maintain a P/S multiple below 5x.

Prospects in Question

The crux lies in whether the AI hype will eventually translate into robust revenue and profitability for C3.ai. Recent results indicate a milder growth trajectory, with the company generating $72.41 million in Q4’23, reflecting a marginal 0.13% year-on-year increase. This tepid performance raises concerns over the sustainability of the AI momentum, a sentiment previously alluded to in analyses that compared AI to other market hypes like electric vehicles, the metaverse, and green energy.

Technical analysis and future projections

The daily chart reveals a pronounced bearish trend in C3.ai’s stock price over the past few months. Notably, a bearish breakout occurred below a crucial support level at $34.51. The peak reached on April 3rd. The bearish sentiment is further corroborated by the shares’ movement below the three lines of the Williams Alligator and the 50% Fibonacci Retracement level. 

These indicators suggest a potential continuation of the downward trajectory in the weeks ahead, with sellers potentially targeting a pivotal support level at $20. This level represents the 78.6% retracement point and implies a decline of approximately 30% from the current stock price.

As C3.ai navigates this challenging period, the larger AI landscape stands at a crossroads, with questions about sustained growth and profitability taking center stage. The market’s response to this situation remains keenly observed, especially as concerns about overvaluation and slower-than-expected growth cast a shadow on the industry’s immediate future. The AI market’s fate will likely depend on how companies like C3.ai adapt and innovate to address these challenges.

The recent sharp decline in C3.ai’s stock price highlights the waning enthusiasm surrounding AI stocks. Despite impressive results from other industry giants, concerns about valuation, growth prospects, and the ability to convert AI hype into tangible financial gains have triggered a notable setback. As the market continues to evolve, only time will reveal whether AI can recapture the momentum it once enjoyed.

Disclaimer. The information provided is not trading advice. Cryptopolitan.com holds no liability for any investments made based on the information provided on this page. We strongly recommend independent research and/or consultation with a qualified professional before making any investment decisions.

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Brenda Kanana

Brenda Kanana is an accomplished and passionate writer specializing in the fascinating world of cryptocurrencies, Blockchain, NFT, and Artificial Intelligence (AI). With a profound understanding of blockchain technology and its implications, she is dedicated to demystifying complex concepts and delivering valuable insights to readers.

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