The business of artificial intelligence is booming.
After excitement over the potential for AI sent tech stocks soaring over the summer and some Wall Street strategists raised their outlook for the stock market, investors have returned to focusing on fundamentals.
C3.ai (AI), which has seen its stock rise more than 200% this year, played a recent iteration when it reported earnings.
C3.ai, an artificial intelligence software company, said it expects 2024 revenue of $295 million to $320 million, in line with Wall Street expectations of $308 million. But the company now expects revenue losses in the $70 to $100 million range. Previously, the company had a loss of 50 to 70 million dollars. It does not expect to be quarterly profitable by the end of 2024.
“We decided to invest in generative AI, invest in lead generation, invest in branding, invest in market awareness and invest in marketing and customer success,” said Thomas Siebel, CEO of C3.ai. told investors on the earnings call.
The stock fell more than 15% after Thursday morning’s opening bell before paring losses to 12%.
“We don’t see top-line metrics. [revenue] Make a material change at this point to ensure the correctness of the increased investment position [on generative AI]JPMorgan analyst Pinjalim Bora wrote in a note on Thursday.
It wasn’t the only time C3.ai saw a shift in market sentiment during its most recent quarterly earnings reports, which began in earnest in late July.
Investors dumped Microsoft ( MSFT ) stock the day after the company said AI’s contribution to revenue would be gradual. Snap (SNAP) stock has fallen As the value of AI investment increases Shares. The same can be said for AMD, which promises that the market for AI accelerators will reach more than 150 billion dollars by 2027. Analysts fear that expectations may be too high.
Citigroup’s Scott Kroenert recently told Yahoo Finance that the AI hype has entered the “show me” stage.
“I don’t think the AI trend and its impact on S&P 500 long-term returns is at risk here,” Croner told Yahoo Finance Live. “I think it’s still an important part of the narrative going forward. But expectations…we have to give them room to adjust as past events unfold and now we’re looking at new additions.
Even companies that continue to demonstrate AI is changing their business haven’t seen the same pop in share prices as of last month, raising doubts about whether the AI rally has run its course and stock prices are too high.
In the most recent quarter, AI darling Nvidia’s adjusted revenue was up 429% compared to the same period last year. The chip giant forecast next-quarter revenue of roughly $16 billion, nearly 30% higher than Wall Street analysts had expected.
The next trading day, the stock increased by only 0.1%. In the year Shares of Nvidia are now down 3% since reporting earnings on August 23rd.
Josh Shafer is a Yahoo Finance reporter.
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