Stock in companies involved in artificial intelligence (AI) are rising after C3.ai (NYSE:AI) won favorable coverage on its quarterly results.
The company lost $63.2 million, or 57 cents per share, on revenue of $66.7 million. It was still up 17% overnight after Wedbush said it was “walking the walk” with its software.
The company’s earnings release guided for fiscal 2023 revenue of about $265 million and a loss of about $71 million. C3.AI stock opened March 3 at $25.24 per share with a market capitalization of about $2.9 billion.
Other small AI stocks like SoundHound AI (NASDAQ:SOUN) and BigBear.ai (NYSE:BBAI) also rose sharply.
What Happened With AI Stocks
Machine learning has been around for years. It’s in the predictive text on your phone and the driving assist features in your car. But it got a huge boost from Microsoft (NASDAQ:MSFT) using OpenAI’s ChatGPT to go after Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and its Google search engine. The program’s ability to generate text from raw Internet data enchanted the mass market.
Like all AI systems, C3.AI is offering applications to solve specific problems, not provide general intelligence. The software offers vertical models in energy, law enforcement and product design, all done from a common platform. The stock is still nowhere near its January 2021 highs, however, when it traded near $140 per share.
The stock’s comeback is a second act for billionaire Thomas Siebel, who sold his Siebel Systems to Oracle (NYSE:ORCL) in 2006 for $5.8 billion. He founded C3.AI in 2010 and took it public at a valuation of $10 billion in 2020.
C3.AI has already blown past the new Wedbush price target of $24. Wedbush still has a “neutral” rating on the stock.
The other small AI companies are also drawing big valuations. Soundhound is worth more than $500 million on revenue of $26.8 million. BigBear is worth $450 million on revenue of nearly $150 million.
What Comes Next?
AI investors are pouring money into AI plays like their predecessors did with internet commerce in the late 1990s or blockchain a few years ago. There may be positive results, but there will also doubtless be tears.
On the date of publication, Dana Blankenhorn held long positions in MSFT and GOOGL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.