Since May, shares in C3.ai (NYSE:AI) have again become highly popular with stock market speculators. During this time frame, AI stock has doubled in price, from $20 to $40 per share.

With shares in the artificial intelligence and machine learning software company making such a big move over such a short time frame, it’s easy to be skeptical whether the stock can hold on to, much less add to, these recent gains.

This is especially the case, when many argue that C3.ai’s big run up has more to do with the high enthusiasm about the rising adoption of generative AI and M/L technology, and less about the company’s fundamentals.

Yet while “AI mania” has certainly played a role in AI’s powerful performance, there is some substance alongside the hype. You don’t need to stay away completely from this stock, and here’s why.

AI Stock: “Smart Money” Skepticism is Warranted

According to Fintel, 34.6% of C3.ai’s outstanding shares have been sold short. It makes sense that the short side of the trade with this stock has become crowded. Wall Street’s “smart money” is very skeptical about the company’s potential to capitalize on the aforementioned AI trend, and for good reason.

As seen from the company’s past fiscal performance, C3.ai (despite exposure to the AI and M/L trends) has experienced some growth challenges.

For instance, after experiencing several years of strong revenue growth, C3.ai’s revenue growth decelerated during the preceding fiscal year (ending April 2023), with reported revenue growth of only 5.6%.

Even before this growth deceleration, C3.ai’s operating performance had disappointed. This resulted in a massive decline in the AI stock price, from over $150 per share in 2020, to just over $10 per share, right before the launch of ChatGPT.

With this spotty track record, it’s easy to understand why many think history will repeat itself. Yet while caution is warranted at today’s prices, you may still want to keep an eye on C3.ai.

Still, Don’t Rule It Out Completely

Again, besides the hype surrounding AI stock, there is sufficient substance as well. Earlier this year, C3.ai quickly capitalized on the generative AI trend, via the launch of its C3 Generative AI Product Suite. This new product suite had little an impact on fiscal results last quarter.

However, both management and sell-side analysts are confident that C3.ai’s pivot towards generative AI, plus other factors, will lead to a growth resurgence this fiscal year (ending April 2024). Back in May, the company guided for between $295 million and $320 million in revenue during FY2024.

That means a potential return to double-digit revenue growth. CEO Thomas Siebel also stated that C3.ai aims to reach non-GAAP profitability during this period as well.

Analysts consensus calls for revenue of around $305.6 million during FY2024, with growth accelerating further during the fiscal year ending April 2025.

Don’t get me wrong, at current prices, the market has factored in the prospect of a growth resurgence into AI’s valuation. Yet if the “AI mania” in the driver’s seat today runs out gas, and shares fall from here, a buying opportunity could emerge.

A Speculative Buy on Any Major Weakness

Like with any speculative bubble, it is a matter of “when,” not “if,” the frenzy surrounding AI will deflate. Still, much like how the end of the Dotcom bubble didn’t bring an end to the rise of the internet, the same scenario could play here with AI and AI stocks.

After a strong performance so far in 2023, AI shares could experience a sharp reversal. A move back down to $30, $20, even back to near $10 per share may not be out of the question.

Yet if the company continues to capitalize on the ever-increasing use of AI and M/L applications, enabling the company to re-enter high-growth mode, shares could easily bounce back following a sell-off.

In short, tread carefully with AI stock today, but consider it as a possible speculative buy on any major weakness.

AI stock earns a B rating in Portfolio Grader.

On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.