C3.ai (NYSE:AI) stock is up 17% today after the artificial intelligence company reported solid earnings and received multiple analyst upgrades on its share price.
AI stock has significantly benefitted from the growing interest in artificial intelligence following the release of several AI-powered chatbots in recent months. Year-to-date, C3.ai’s stock has risen 93% to trade at $21 a share. And that was before today’s big move.
However, short interest in C3.ai also grew dramatically during February and before today’s strong earnings print. This raises the prospect that the stock could be primed for a significant short squeeze.
What Happened
C3.ai posted fiscal third-quarter results that beat Wall Street estimates on both the top and bottom lines and issued bullish forward guidance. The Redwood City, California-based company posted a narrower-than-expected loss of 5 cents per share compared with Wall Street forecasts for a 22 cent loss, according to Refinitiv data. Revenue in the quarter came in at $66.7 million, which beat expectations for $64.2 million. The company also forecasted revenues and profits for its current fourth quarter that were stronger than analysts anticipated. Several analysts, including at Wedbush Securities, upgraded their ratings on AI stock following the strong quarterly results.
The blowout quarter comes as the short interest in C3.ai stock grows significantly. As of Feb. 15, there was short interest totaling 22.15 million AI shares, which represents a growth of 180% from Jan. 31 of this year. According to market data, a quarter (25.6%) of the company’s shares are currently sold short. That sets up AI stock for a big potential short squeeze that could push its stock even higher in the coming days and weeks. C3.ai has become a trending topic on message boards and chatrooms favored by retail investors.
Why It Matters
Founded in 2009 by billionaire businessman Thomas Siebel, C3.ai is a relatively small company that flew largely under the radar until the release last fall of ChatGPT, which ignited significant interest in artificial intelligence. Focused on developing enterprise AI software for multiple uses, C3.ai’s current clients include energy giant Royal Dutch Shell (NYSE:SHEL) and the U.S. Air Force. C3.ai’s technology applies AI to enhance machine learning and neural networks. Its technology is used across industries ranging from the financial to industrial sectors.
With its stock up more than 90% this year, many traders on Wall Street are betting that the share price is due for a correction and move lower. However, retail investors look to counter that notion by bidding up the stock price and forcing professional traders betting against the stock to buy shares to cover any potential losses. Today’s blowout quarterly results issued by C3.ai have bolstered bullish sentiment towards the stock and emboldened the retail investors behind the share price rise.
What’s Next for C3 and AI Stock
The run-up in AI stock will continue today following C3.ai’s strong earnings print and equally strong forward guidance. Whether the stock ends in a short squeeze will likely be known in a few days or weeks.
Until then, investors should keep an eye on the price and watch to see how high it goes, keeping in mind that most short squeezes end suddenly with the stock price plunging back to earth.
On the date of publication, Joel Baglole 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.
