1 No-Brains Artificial Intelligence (AI) Stock to Buy for $25 and Hold for 10 Years

C3.ai (NYSE:AI) was one of the world’s first AI companies. It was founded in 2009 and now has a portfolio of more than 40 pre-built software applications designed to help companies accelerate the adoption of artificial intelligence (AI).

C3.ai made a significant change to its business model two years ago, and it’s starting to pay off in the form of accelerated revenue growth. But its stock remains 87% below its all-time high set during the tech frenzy of 2020.

C3.ai stock was undoubtedly overvalued at the time. But the company’s strong growth combined with a significant financial opportunity in the AI ​​industry make it look like a great value now. Here’s why investors with an extra $25 might want to spend it on a single share of C3.ai.

Image source: Getty Images.

A unique way to play the AI ​​boom

C3.ai serves companies across 19 industries, many of which aren’t typically associated with cutting-edge technologies like AI. These include manufacturing, oil and gas, utilities, and more. That’s because C3.ai offers a unique value proposition—the company can deliver customized AI solutions to customers in as little as three months from an executive briefing.

Oil and gas giant Shellfor example, has deployed more than 100 C3.ai applications across its organization. They are used to monitor more than 10,000 pieces of equipment for predictive maintenance, reducing the likelihood of catastrophic failure. Additionally, at one Shell liquefied natural gas plant, C3.ai asset optimization software has reduced carbon dioxide emissions by 355 tons per day. That’s enough to take 28,000 vehicles off the road in the United States.

C3.ai sells its AI software directly to customers, but also has sales partnerships with tech giants like Microsoft, AmazonAND AlphabetThey offer C3.ai applications on their cloud platforms, making them available to millions of customers the company might not otherwise have access to.

In the first quarter of fiscal 2025 (ended July 31), C3.ai closed 51 deals through its partner network, an increase of 155% compared to the same period last year. They represented 72% of C3.ai’s total deal flow, underscoring the importance of its partnerships.

Accelerated revenue growth

C3.ai generated a record $87.2 million in revenue in Q1, up 21% year-over-year. It also marked its sixth consecutive quarter of accelerated growth, a direct result of the company’s strategy shift two years ago.

At the start of C3.ai’s fiscal 2023 year (which began May 1, 2022), the company told investors it would transition from a subscription-based revenue model to a consumption-based model. The goal was to eliminate lengthy negotiation periods with customers, allowing them to join C3.ai with less friction and allowing them to pay only for what they use.

The company warned investors that the strategy change would lead to a temporary slowdown in revenue growth while it transitions to a new model for its current customers. By the end of fiscal 2023, revenue actually started growing shrink compared to the year-ago period. However, the assumption was that consumer prices would lead to much faster customer purchases, which would accelerate revenue growth in the future. That seems to be what is happening now.

C3.ai’s accelerating growth is more impressive when you consider that the company is carefully managing its costs to improve its bottom line. That means it’s spending less aggressively on growth-oriented initiatives like marketing. C3.ai’s total operating expenses rose just 8.8% year over year in Q1. Because revenue grew faster, that led to a 2.4% reduction in net loss from the year-ago period, to $62.8 million.

However, on a non-GAAP basis, C3.ai’s net loss was only $6.8 million. The company paid its employees $54.6 million in stock-based compensation during the quarter (which is a non-cash expense). Dividing C3.ai’s net result even further, we see that it generated $7.1 million in free cash flow.

The Company has $762 million in cash, equivalents and marketable securities on its balance sheet, so generating positive free cash flow will protect this position and reduce the likelihood of needing to raise capital in the near future.

Why C3.ai Stock Is a Buy Now

C3.ai went public in December 2020, during a tech frenzy fueled by trillions of dollars in U.S. government stimulus spending and record-low interest rates. C3.ai’s share price peaked at $161 that same month, at which point it was trading at a staggering price-to-sales (P/S) ratio of about 80.

The 87% drop in the stock price and the company’s revenue growth since then have pushed the P/S multiple down to just 7.7. That’s now 29% below the three-year average of 10.8 (which excludes the highs from 2020).

AI PS ratio data by YCharts.

With C3.ai’s revenue growth currently accelerating, I’d argue the company should be trading above its average P/S multiple — especially since management’s guidance for the upcoming second quarter of fiscal 2025 (ended October 31) indicates a further acceleration in revenue growth, up to 28%.

According to a recent PwC study, about 70% of CEOs expect AI to significantly change the way their organization creates value in the next three years. Not all of these companies will be able to develop AI from scratch, so many will be looking for solutions like those offered by C3.ai. PwC also expects AI to add $15.7 trillion in value to the global economy by 2030, so the financial opportunity is huge.

Investors may want to take advantage of the sharp decline in C3.ai stock and add it to their portfolios as the coming decade could prove to be a breakthrough for the company.

Is it worth investing $1000 in C3.ai now?

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, CEO of Alphabet, is a member of The Motley Fool’s board of directors. Anthony Di Pizio has no ownership interest in any of the stocks mentioned. The Motley Fool owns shares in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 call options on Microsoft and short January 2026 $405 call options on Microsoft. The Motley Fool has a disclosure policy.