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Here’s why long term investors should check out C3.ai

by Concerns of the Future 13 days ago in investing

A SaaS giant that looks to have software that many can't seem to replicate.

Here’s why long term investors should check out C3.ai
Photo by Markus Winkler on Unsplash

*This is not financial advice. All content should be considered opinionated. We are not responsible for any of your gains and losses. I am neither a licensed nor a registered financial expert. Please see a financial advisor before making investment decisions.

C3.ai went public in mid-December of 2020. This artificial intelligence software company essentially provides the building blocks for companies to create AI applications. The company operates with a SaaS business model, making the business a recurring revenue business. Unlike other AI tools, C3.ai allows companies to create AI applications faster and with less code. This helps companies reduce development time significantly.

Investors are concerned that because some of their largest clients are in the energy sector, that declines in the energy sector will affect C3.ai negatively. However, C3.ai has been diversifying away from the energy sector and has clients in other sectors as well as in the government.

The expansion strategy of C3.ai is unique. Motley Fool writer Leo Suns writes:

C3.ai expands via a “lighthouse” strategy, in which it secures a top “lighthouse” customer in a sector to attract its industry peers. These lighthouse customers include 3M, Royal Dutch Shell, and the U.S. Air Force.

In other words, C3.ai focuses on acquiring an influential player of a sector and from there, uses the notoriety from doing business with the influential industry player to acquire more customers that are in that industry and that are within the sector that it operates in.

To clarify, C3.ai is in the enterprise AI infrastructure and applications market. Their tools help companies and government organizations to build and run AI applications for various purposes. Engie, one of Europe’s largest utility companies, used C3.ai’s software to figure out why one power source lagged another by 2%. Interestingly, solving that problem saved the utility giant more than $125 million each year in operational costs. Another client, the US Air Force, uses C3.ai’s software to help predict whether important weapons systems will be ready for deployment. According to a Department of Defense report, “80 to 90 parts out of more than 1,000 that are responsible for 90 percent of total aircraft downtime.” Because of this, the US Department of Defense saved up to $5 billion each year just by finding and solving the issue that C3.ai’s found. Overall, organizations use C3.ai’s software to streamline their operations, cut costs, and make data-driven decisions.

Unlike C3.ai’s competitors, C3.ai was an early mover in the space and has invested significant amounts of time and money to create the AI applications that it currently provides today. This heavy investment is what helped C3.ai’s software outcompete its competitors significantly. Believe it or not, many of C3.ai’s clients have tried to replicate their software with the resources they had but they all failed. The clients that tried to copy C3.ai’s software include Snowflake, Databricks, Datastax, H2O.ai, and DataRobot.

Conclusion

Overall, C3.ai has proven to be the leader in the enterprise AI infrastructure and applications market. With software that many can’t seem to replicate and a leader that’s visionary and bold, C3.ai is a company that has brighter days ahead. The company’s software will play a vital role in the world as the Internet of Things IIoT) becomes a bigger thing and while the stock is still expensive, it has come down over 50% from its IPO price.

While C3.ai is still not profitable, it has a strong balance sheet, impressive growth rates, and holds an impressive customer base.

C3.ai is a great stock for long-term investors who are optimistic that they can continue to be the leader in the growing enterprise AI infrastructure and applications market. If you’re bullish on IoT and on the enterprise AI infrastructure and applications market, then this is the stock for you.

While Mr. Market is currently offering a juicy discount on this company’s stock, do your own research and talk to a financial advisor before making any investment decisions. You don’t want to rush in and wish that you did your research before pressing the “buy” button.

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Concerns of the Future
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Concerns of the Future

The pandemic has opened my eyes and has given me experiences that have shown how current trends are making the world a worse place.

I don't see bureaucrats as a solution to problems. I see the common people, demanding change, to solve it.

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