Down 75% From the High, AI Stock is a Strong Buy (NYSE:AI) stock has gone from hot to ice cold in record time. completed its initial public offering last fall and started trading around $95. It shot up to $180 in a matter of weeks. But, since then, shares have lost fully 75% of their value just since December.

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Two factors have combined to demolish AI stock. The first is the general malaise in speculative high growth stocks. Cathie Wood’s flagship ARK Innovation ETF (NYSEARCA:ARKK), for example, dropped 30% from its highs earlier this year.

Even as the Nasdaq tech stock index has made new highs, the upstart tech companies that make up exchange-traded funds such as ARKK got blasted. People are happy to buy Apple (NASDAQ:AAPL) right now, but there are serious reservations backing any company that doesn’t yet produce profits or free cash flow. finds itself among that unproven group. Over the past 12 months, it generated an operating loss of $56 million and had negative $38 million in cash from operations. That, combined with a slowdown in its revenue growth rate was enough to derail the company’s momentum.

However, it’s not time to give up on AI stock. In fact, this is a compelling entry point. Big Contracts, Narrow Customer Base

Most software-as-a-service (SaaS) companies tend to sell moderately priced software to a large number of users. Think of some project management software, for example, where a company may pay $50 per user per month and sign up for dozens or hundreds of seats. This sort of sale is easy to generate. The customer knows what they’re getting, it’s easy to set up and it’s not a big deal if the customer eventually wants to cancel.

In other words, there’s not a lot of friction in getting new clients., however, is not selling bite-sized subscriptions to the masses. Rather, it signs huge long-term deals with a select number of customers. Its flagship contract with Baker Hughes (NYSE:BKR), for example, is for hundreds of millions of dollars and included a Baker Hughes investment in equity.

While sports big contracts with name-brand clients such as the U.S. Air Force and 3M (NYSE:MMM), it doesn’t have a broad customer list. In fact, it has only about 100 customers in total. Bears like to point to this to say that is not a mainstream technology platform as of yet.

Sales Process Now Kicking Back Into Gear

As you can see, has a different business model than most SaaS companies. It wants to land big customers and keep them for many years, rather than chasing lots of smaller incremental business.

The problem with this setup became clear during the pandemic. Many information technology departments were happy to spend on new software during pandemic. Particularly for mission-essential things such as secure video conferencing, the will was there.

Something like’s artificial intelligence-powered efficiency software is not easy to sell via remote calls, however. If a company is going to decide on a piece of software that will potentially cost tens of millions of dollars over the course of its usage, that’s not a decision made flippantly. The inability to travel and sell the software in person made it difficult to close any deals.

Indeed, this time last year, was generating hardly any new business at all. Things finally changed in the most recent quarter, where’s bookings grew 179% sequentially, and 500% from the same period a year ago. Revenue growth was still light, as it takes time to go from a booking to realized revenue. Still, judging from the most recent quarter, is well positioned to return to robust levels of growth by the end of this year.

AI Stock Verdict is a bet on CEO Thomas Siebel. He built one of the more successful software companies of the late 1990s in Siebel Systems. He may be building another in Or maybe he won’t succeed this time around. Potential investors in AI stock are betting on the jockey here.

What’s clear is that the odds of Siebel’s eventual success haven’t significantly changed over the past year. When the stock was at $183, investors seemed to think that it was inevitable that would grow to dominate the field of artificial intelligence. Now, investors apparently have concluded that’s mission is nearly impossible.

Yet, when you zoom out, has been in business for more than a decade and is still ramping up. No one would dispute that had a challenging time over the past year. However, that’s understandable given the company’s business model. With revenue growth kicking back into high gear, investors that stick with Siebel here stand to be rewarded.

On the date of publication, Ian Bezek held a long position in AI stock. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

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