AI Stock Rebounds From Key Level Amid An AI Shift In 2025; Is C3.ai A Buy?

C3.ai stock (AI)  rebounded off a key level to start the new year amid bullish reports on software plays that address high-growth artificial intelligence enterprise applications.

For one, Goldman Sachs' 2025 forecast pointed to a shift in the AI revolution from infrastructure builds to software rollout.

C3.ai shares rose after AI company Palantir (PLTR) was reported to be teaming up with Anduril to form a defense consortium. Palantir has huge government and defense contracts. C3.ai also has a strong footprint in the industry.

But while Palantir was 2024's top S&P 500 gainer and rose 341%, AI stock gained just 20%. The S&P 500 returned 23%. Is C3.ai stock a buy now?

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Second-Quarter Results, Trump Rally

Shares of C3.ai stock rose after second-quarter results were announced Dec. 9. Sales grew 29% to $94.3 million while the company reported a loss of 6 cents per share. Analysts expected $91 million in sales with a loss of 16 cents per share vs. a year-ago loss of 13 cents.

Shares got a lift early November after election results triggered the Trump rally.

On Dec. 18, shares fell amid Chief Executive Office Thomas Siebel's warning about an AI bubble. Shares fell 7% and headed even lower the next day after an analyst downgrade, falling 10%.

Siebel noted in an interview on CNBC that markets were over-evaluating the AI technologies. "There is a bubble. When there are technological breakthroughs, the market tends to overvalue them ... but it will correct at some point," he noted.

The stock climbed past the 33.11 buy point of a cup pattern and climbed as much as 36%. But shares then pulled back toward the buy point. Shares, however, are rebounding from the 10-week moving average, avoiding  a round-trip sell signal. After touching the line at 34.20, the stock is again extended.

AI stock rose 2% on Dec. 4 after earnings reports from software titan Salesforce (CRM) showed that the Dow Jones member was on track with its latest artificial intelligence agents product, called Agentforce.

Meanwhile, KeyBanc Capital Markets analyst Eric Heath downgraded the stock to underweight from sector weight Dec. 19. He cited concerns about subscription revenue growth and revenue estimates that may be too high. The stock sold off 10.7% that day.

Microsoft Partnership

On Nov. 19, the AI play announced that Microsoft (MSFT) will extend its partnership and provide cloud computing services through Azure to the artificial intelligence company. AI stock soared 24.2%, it best day since May 30, 2023, when it rocketed 33.4%, according to Dow Jones Market Data.

Microsoft and C3.ai entered into a partnership in 2018 to provide enterprise AI services to several companies.

The enterprise software company has not been idle on the technology front, either. In late October, C3.ai won a patent for its AI Agent technology. Compared to copilots that assist and answer queries, AI agents can act and perform tasks on their own.

Relative Strength Improves For C3.ai Stock

C3.ai has a Relative Strength Rating of 92, a sharp increase from 18 three months ago. Investor's Business Daily recommends focusing on stocks with an RS Rating of 80 or above. 

November's rally helped the stock outperform the S&P 500. The stock soared 51%, well above the S&P 500's 6% monthly gain. In December, shares fell 7% whereas the S&P 500 fell 2.5%.

Shift In Pricing Model

Industry trends have worked in C3.ai's favor as well. The stock skyrocketed Feb. 1, when users successfully tapped OpenAI's ChatGPT artificial intelligence app to generate answers, texts, emails and even write books.

The ChatGPT app reached 100 million monthly active users in two months, beating popular apps like TikTok and Instagram. OpenAI's app uses natural language to help users write emails, write code and find answers to daily questions.

There are other considerations. In December 2022, C3.ai changed its pricing model from subscription to consumption-based pricing.

The move brought the company in line with industry standards for software-as-a-service providers. The practice is common across Amazon.com's (AMZN) Amazon Web Services, Alphabet's (GOOGL) Google Cloud and Microsoft's Azure, as well as smaller players.

Consumption pricing works like a utility bill. That is, the higher the consumption, the pricier the service. Since AI customers will benefit from having access to an AI enterprise platform with unlimited use and developer licenses, the switch to consumption pricing could drive revenue growth, but not immediately.

C3.ai CEO Thomas Siebel has indicated the consumption-pricing model will also lower barriers to entry because companies do not have to be tied to long contracts.

Artificial Intelligence News And AI Stocks To Watch

Is C3.ai Stock A Buy Now?

Redwood City, Calif.-based C3.ai makes software applications equipped with artificial intelligence that can be configured for different purposes.

The software can make networks more reliable by detecting fraud, balancing inventory and demand, solving supply-chain issues and increasing energy efficiency. It can also help defend against money laundering.

The enterprise software stock popped on its first day of trading, Dec. 9, 2020. Shares leaped from their initial public offering price of 42 to finish at 92.49 that day.

C3.ai stock is prone to drastic swings. On Nov. 20, 2023, C3.ai stock jumped more than 5% but reversed lower to close with a 4.3% loss when Sam Altman was ousted as chief executive from another artificial intelligence specialist, OpenAI.

Altman quickly returned to OpenAI, but the news apparently triggered speculative trading as the market continued to search for leaders in the space.

C3.ai stock holds a Composite Rating of 87 while the EPS Rating lags at 47 due to the company's losses. Although the stock is back in a buy zone, it is now extended from the 34.20 entry. It is also extended from the 33.11 buy point.

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