AI stocks are enjoying a strong day in the markets. Indeed, investors seem to have regained confidence in the quickly growing artificial intelligence industry after C3.ai’s (NYSE:AI) recent rebuttle to some scathing accusations from short seller Kerrisdale Capital. What’s going on with AI stocks?
Well, after losing around 38% of its share value over the past two days, C3.ai is out to clear its name. On Tuesday, April 4, Kerrisdale released a report in which it alleged that the company had “serious accounting and disclosure issues.”
In a letter to C3.ai’s auditor Deloitte & Touche, LLP, Kerrisdale Chief Investment Officer Sam Adrangi accuses the company of taking advantage of “highly aggressive accounting to inflate its income statement metrics in order to meet sell-side analyst estimates for revenue and certain profit metrics, and to conceal significant deterioration in its underlying operations.”
Fortunately for C3.ai, though, the company’s prepared response to the letter has seemingly regained investor trust:
“The Kerrisdale letter appears to be a highly creative and transparent attempt by a self-acclaimed short seller to short the stock, publish an inflammatory letter to move the stock price downward, then cover the short and pocket the profits. Without comment on the legality of stock manipulation nor the innuendo replete in the letter, we will note that their allegation that C3 AI’s financial disclosures regarding Baker Hughes are somehow incorrect manifests a fundamental misunderstanding of U.S. GAAP accounting practices and principles.”
In the three-page response statement to Kerrisdale, C3.ai addresses each accusation against the company. AI stock closed up more than 8% today as a result, with investors appearing relatively satisfied with the defense of its accounting practices.
According to Bloomberg, Kerrisdale is also one of “nearly 30 short-selling firms being probed by the US Justice Department over potential trading abuses.”
Why Are AI Stocks Up Today?
C3.ai isn’t the only AI company that enjoyed some love today. A number of other AI stocks also climbed, though none more than Guardforce AI (NASDAQ:GFAI) stock. The Singapore-based AI startup closed up more than 40% today, seemingly on speculation surrounding a potential short-squeeze opportunity.
Indeed, there aren’t any specific news items pushing the stock up today. Rather, data from Fintel shows the short borrow fee for Guardforce has skyrocketed recently — reaching almost 200%, making it one of the top 30 stocks on Fintel’s Short Squeeze Leaderboard. As such, GFAI stock has been the subject of tremendous volatility.
Aside from Guardforce and C3.ai, both BigBear.ai (NYSE:BBAI) and SoundHound AI (NASDAQ:SOUN) also ended the day well in the green. Both are up 14% and 15%, respectively, on more AI speculation.
Sevens Report Research Founder Tom Essaye said the following about the movement in AI stocks:
“Basically I think there’s some regulation concerns, not so much in the governmental sense yet, but perhaps industry regulations. That’s just injecting some fundamental uncertainty into the whole space, and given the valuations and popularity of the AI names, it’s resulting in some wild gyrations!”
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On the date of publication, Shrey Dua did not hold (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.
