Let’s talk about the recent buying frenzy in AI stocks, where everything AI-labelled is treated like gold. Take for instance C3.ai and Opera, both of which have seen their stocks surge by 240% and 210% respectively, since the start of the year.
Now, as investors, the question we need to ask ourselves is: Are these rising AI stars worth hitching a ride on?
Are C3.ai and Opera Really AI Stocks?
C3.ai, an “enterprise AI software” company, has a bit of a name-changing habit. You might remember it as C3 Energy or C3 IoT. The firm underwent an AI rebranding in 2019, a move that correlates well with the growing market interest in AI technologies.
But before you buy into the AI hype, let’s dig deeper. C3.ai essentially develops machine learning algorithms. Are these cutting-edge AI tools? There’s some debate on that front.
C3.ai primarily serves big energy, industrial, and government clients, with over 30% of its revenue generated through a joint venture with Baker Hughes. This partnership is set to expire in 2025, which adds an element of uncertainty to the mix.
In the case of Opera, which controls about 3% of the global web browser market, its AI label comes from a recent upgrade. The firm partnered with OpenAI to introduce AI-generated content services and launched Opera One, a new browser version with integrated AI features.
These features haven’t yet generated meaningful revenue for Opera. However, they seem to have boosted investor confidence, judging by the stock’s performance.
Speed vs. Steadiness: The Growth Game
In terms of growth, C3.ai and Opera tell two different stories. C3’s revenue growth has slowed significantly, from 38% in fiscal 2022 to 6% in fiscal 2023. This slowdown is attributed to economic conditions and competition from other cloud infrastructure platforms like AWS, Azure, and GCP.
Opera’s revenue growth, on the other hand, was strong in 2022 at 32%. However, the company predicts slower growth for 2023, indicating that its new AI browser might not be the game changer it was hoping for. Still, with a robust user base and profitability on its side, Opera isn’t out of the running just yet.
The Verdict
When it comes to the valuations, C3.ai trades at 14 times this year’s sales. Given the challenges it faces and its sluggish near-term growth rates, investors might want to proceed with caution.
Opera, on the other hand, trades at four times this year’s sales. Despite potential headwinds, its resilient business model, solid growth rates, and profitability make it an attractive investment option in comparison to C3.ai.
