What Happened: Shares of artificial intelligence (AI) software company C3.ai (NYSE:AI) jumped 5.7% in the afternoon session after peer, Palantir (NYSE:PLTR) reported fourth-quarter results with expectations for revenue growth to accelerate in the next fiscal year, highlighting growing demand for artificial intelligence solutions.
Palantir's revenue, billings, and free cash flow exceeded Wall Street's expectations in the quarter, and its gross margin improved. Notably, Palantir's US commercial business significantly contributed to the solid performance during the quarter, as revenue in the segment grew 70% year on year and 12% sequentially. Looking ahead, Palantir expects the US commercial business to grow at least 40% in 2024. Overall, the results highlight the potential in the AI market, which picked up momentum in 2023. Palantir's guidance suggests it is still early days in the AI space, with the likes of C3.ai expected to benefit from the expanding market opportunity.
Is now the time to buy C3.ai? Find out by reading the original article on StockStory.
What is the market telling us: C3.ai's shares are very volatile and over the last year have had 68 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 26 days ago, when the company dropped 6.4% as major indices retreated after the Bureau of Labor released inflation data for December 2023, which came in hotter than expected at 3.2%, above the market consensus of 3.1%. Similarly, the data showed that inflation rose by 0.3% compared to the previous month instead of the anticipated 0.2%.
These differences versus expectations may seem quite small, and make no mistake, they are. However, recall that there was much enthusiasm in the markets to end 2023 based on the expectation that rate cuts in 2024 are nearly a sure thing. The market move is reflecting a pushback on this narrative and giving back some of the big gains in the last few months of 2023.
As a reminder, the driver of a stock's value is the sum of its future cash flows discounted back to today. With lower interest rates, investors can apply higher valuations to their stocks. No wonder so many in the investment community are optimistic about 2024. We at StockStory remain cautious, as following the crowd can lead to adverse outcomes. During times like this, it's best to own high-quality, cash-flowing companies that can weather the ups and downs of the market.
C3.ai is down 10.6% since the beginning of the year, and at $25.71 per share it is trading 44.6% below its 52-week high of $46.37 from June 2023. Investors who bought $1,000 worth of C3.ai's shares at the IPO in December 2020 would now be looking at an investment worth $277.65.