C3.ai (NYSE:IA) The stock rushed out of the gate Tuesday morning, gaining 13.2% through 9:50 a.m. ET after announcing a “strategic alliance” with software powerhouse Microsoft.
Highlight the respective strengths of each company, Specialist in artificial intelligence (AI) applications C3.ai and AI server farm operator Microsoft say they will work together “to enhance existing capabilities and introduce new innovations that will help our joint customers maximize the delivery of enterprise AI solutions high added value with Azure”.
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Specifically, Microsoft intends to integrate C3.ai’s enterprise AI application software into the Microsoft Commercial Cloud portal, align C3’s applications with new Azure capabilities, and work together to market and supply C3 products to customers.
Going forward, Microsoft will be “the preferred cloud provider for C3 AI offerings.” And vice versa as well, C3.ai will be “a preferred provider of AI application software on Microsoft Azure.”
But note the details. As you would expect in a relationship between a small company like C3, with a market cap of $3.8 billion, and a titan like Microsoft, whose market cap exceeds $3.8 billion. trillionMicrosoft is becoming “the” preferred vendor for C3 applications, but C3 will only be “a” preferred vendor for Microsoft.
It seems to me that this is probably a distinction with a difference. This suggests that C3.ai investors might be overreacting a bit to today’s news.
Consider: in the same press that announces this new alliance, C3 also notes that it is in fact Already in a strategic alliance with Microsoft – as has been the case for the past six years. Also note that today’s press release contains no actual figures, no forecasts of new revenues or profits for C3 that will arise from this new alliance. Last but not least, be aware that despite an existing alliance with Microsoft, C3 lost $280 million last year and is expected to continue losing money for as long as analysts make estimates.
C3.ai remains a risky value, and it’s not a purchase.
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