Artificial intelligence (AI) has been a major driving force behind the impressive gains in this year's stock market. However, profiting from AI is not as straightforward as it may seem.
Software companies like C3.ai (ticker: AI) and Palantir Technologies (PLTR) have demonstrated this reality to investors. In a recent development, C3.ai's CEO, Thomas Siebel, decided to withdraw the forecast that the company would achieve profitability on an adjusted basis by the end of the 2024 fiscal year. Similarly, Palantir CEO Alexander Caedmon Karp acknowledged that his company is still in the process of figuring out how to effectively monetize the current AI trend.
Despite these challenges, the stock prices of both C3.ai and Palantir already reflect a sense of euphoria surrounding AI. So far this year, C3.ai's stock has surged by a staggering 181%, while Palantir's stock has seen remarkable growth of 138%.
The excitement surrounding AI-driven companies and their potential achievements has not only impacted individual stocks but also the broader market. The "Magnificent Seven" group of technology stocks, including prominent players like Nvidia (NVDA) and Apple (AAPL), who are deemed as strong contenders in the AI field, accounted for three-quarters of the S&P 500's gains by mid-year.
However, it is important to note that not all stocks with exposure to AI have experienced the same meteoric rise as Nvidia, which has seen a remarkable increase of 222% this year. Nvidia has established itself as a key supplier of chips that can handle the substantial computational requirements of AI applications. On the other hand, companies like C3.ai are currently exploring different business models to expand their customer bases and better position themselves in the market.
In conclusion, artificial intelligence continues to have a significant impact on the stock market. While certain companies have experienced impressive growth, challenges remain in effectively capitalizing on the AI trend. Investors should carefully evaluate both the potential and the risks associated with investing in AI-related stocks.
C3.ai Shifts to Consumption-Based Pricing Model
C3.ai made a significant transition last year by adopting a consumption-based pricing model instead of the previous subscription-based model. This strategic shift aims to attract a larger number of smaller deals, following in the footsteps of successful companies like Snowflake and Google Cloud. Under the new approach, customers are offered pricing per hour after an initial three-month period of unlimited access at a fixed cost of $250,000.
Palantir's Upcoming AI Platform
In the realm of artificial intelligence, Palantir is a relatively new player. The company specializes in providing advanced data management systems for government entities and corporations. Earlier this year, Palantir announced its plans to release an Artificial Intelligence Platform (AIP). This announcement has sparked investor interest, resulting in a 78% surge in the company's stock. CEO Karp has made it clear that Palantir's primary focus for now is educating the market about its offerings and onboarding customers.
Strong Demand Fuels Growth Prospects
Both Palantir and C3.ai have reported substantial demand for their services. Considering the increase in their stock prices throughout the year, it appears that this interest is translating into tangible financial gains. Despite being in a highly competitive market, these companies seem well-positioned for a prosperous future.
As of Thursday’s market opening, C3.ai stock experienced a 17% drop while Palantir suffered a 6% decline. Additionally, the tech-heavy Nasdaq Composite index declined by 1.4%.