Recently, C3.ai (NYSE:AI) stock has pulled back.
To some, this may look like an opportune time to “buy the dip” with AI stock. After all, couldn’t a renewal of enthusiasm for generative artificial intelligence stocks led to a rapid rebound?
It’s possible, but keep in mind that such a turn of events is hardly a lock. After months of “AI mania,” this has simmered down.
Such a sentiment change may have only a modest impact on the price of larger, more established stocks with high AI exposure. With more speculative AI plays like this one, though, it may be a different story.
This provider of enterprise AI software has massive potential to profit from this trend, which, despite shifting sentiment, has not slowed. Even so, as I’ll explain below, there’s no need to be hasty.
AI Stock is the Real Deal
Between past questioning of its business by a vocal short seller, along with its reputation as a “meme stock,” it’s easy to see why some investors are skeptical about C3.ai’s generative AI bona fides.
I can also see why these skeptics sometimes lump the company into the same category of other companies that have hopped on the AI bandwagon, but whose actual exposure to AI is dubious at best.
However AI stock is the real deal. This company has strong potential to capitalize on the rising use of AI across numerous applications. For one, C3.ai is not some sort of fly-by-night AI upstart.
Founded in 2009, and headed up by billionaire tech entrepreneur Thomas Siebel, this was already an up-and-coming name in AI, years before the term “generative AI” entered the public lexicon.
Not only that, as I argued recently, with new offerings like its C3 Generative AI product suite, and its decision to switch to a consumption-based pricing model, the company has set itself up to experience strong revenue growth as this trend continues.
In turn, leading to a swing toward profitability.
Still, this potential notwithstanding, don’t expect this substance to prevent a continued sell-off for shares.
A Correction Could Prove Positive
It’s not only the stock market Cassandras that are arguing “AI mania” is on the verge of reversing course. Based on how names in this space, including AI stock, have performed lately, many are starting to say that the beginning of the end for the “mania” may already be here.
Why? Largely, because one factor that is driving this AI sell-off is that investors are realizing that AI catalysts will take time to have an impact on earnings.
This factor could prove to be the match in the powder barrel, that one thing that drives the metamorphosis of this economic bubble into a bust.
Other factors could serve to extend the reversal. Eric Fry recently argued that an “AI panic” is coming. There are rising concerns about AI’s potential future impact on humanity.
This panic/backlash may not bring this technological revolution to a screeching halt, but it could heighten the extent in which investors cycle out of AI-related stocks.
Put simply, the odds of a serious correction for AI stocks keeps climbing. While this may result in C3.ai shares continuing to tumble lower, this could prove to be a positive, if you’re approaching this stock the right way.
“Watch and Wait” for a Better Entry Point
Going back to earlier this year, when C3.ai experienced a resurgence in popularity, I have argued that this stock needs to be approached the right way.
Instead of considering it a buy at any price, carefully building a long-term position by buying it only on major weakness, was the better move.
Still standing by this argument, the good news with a possible continuation of AI’s latest pullback is that another opportune moment to build up your position may be months, if not weeks away.
The aforementioned sentiment shift, plus perhaps a negative reaction to C3.ai’s upcoming earnings release on Aug 30, may intensify the current sell-off.
With this in mind, “watch and wait” with AI stock. Pretty soon, a better entry point ($20 per share, or even lower) could arrive.
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.
