C3.ai - A highly speculative bet for the AI hype

$C3.ai, Inc.(AI)$  has recently caught the attention of many investors due to its branding and involvement in the field of artificial intelligence (AI). While there is a lot of hype in AI due to its immense potential growth, one must be cognisant that it does not necessary mean that C3.ai is a good investment option. There are several reasons why you should be cautious before investing in it.

1. Loss Making amidst economic uncertainty

Firstly, C3.ai is still unprofitable. Despite the AI hype, it has yet to generate any positive net income or cash flow from operations to date. In fact, its net losses have been increasing over the past few years with no clear path to profitability. Given a high interest rate environment and looming recession, it is imperative to invest in profitable companies with strong fundamentals that can weather through tough economic situations.

2. Unattractively High Valuation

Secondly, C3.ai's valuation is currently very high compared to its counterparts. Its price-to-sales ratio is 8.8 which is at least 30% higher than the sector average. Although some may be willing to a premium for growth stocks, one must remember high valuation means high expectations and failure to meet the expectations can result in significant correction of the stock price.

3. Strong industry competition

Next, C3.ai has yet to fully establish its foothold in this highly competitive AI industry. Many other established companies, such as $Alphabet(GOOGL)$ and $Microsoft(MSFT)$ Bullish, have recently rolled out solutions / prototypes that offer great prospects and possess the financial muscles to further strengthen them. This implies that C3.ai faces an uphill tasks to compete with these juggernauts.

4. Speculative bet in high competitive industry

Lastly, one must be cognisant that the AI industry is in relatively early stage of maturity. While there is great potential growth, there are many unknowns and it is difficult to ascertain which companies will be the ultimate winners of this AI race. As a risk averse investor, I am unlikely to initiate positions in C3.ai as it involves a rather high degree of speculation. 

What are your thoughts on C3.ai and the current AI hype? [Grin] 

@TigerStars @CaptainTiger @Tiger_chat @MillionaireTiger @TigerEvents