C3.ai Stock Warning: Don’t Get Carried Away With AI Euphoria! – InvestorPlace

C3.ai's upcoming quarterly financial report could be a trap door for AI stock

Source: shutterstock.com/Tex vector

It makes sense that enterprise artificial intelligence companyC3.ai(NYSE:AI) and its investors would benefit from the machine-learning boom. However, AI fever seems to have reached a dangerous tipping point. If your AI stock outlook is too optimistic, you might overlook the major downside risks. Plus, the stockis susceptible to a sharp pullback because theres a crucial event coming up for C3.ai.

Time and again, Ive encouraged C3.ais current and prospective investors to be patient. Remember when others are greedy, its time to be cautious.

I understand that its difficult to apply that principle when C3.ai stock is on an upswing. However, your financial health depends on your ability to resist temptation during times of trend-driven euphoria.

Recently, AI stock surged 5.7% higher even though C3.ais news page didnt indicate that anything special was going on with the company. Incidents like this can be baffling, but a little bit of digging will reveal the reason for the share-price run-up.

Heres what happened. Palantir Technologies (NYSE:PLTR) leaped higher by over 30% because the company reported strong fourth-quarter 2023 results. Palantir has been known as a cybersecurity business for years, but now, it seems as if the company is emphasizing its AI-focused products and features.

Furthermore, Palantir Technologies CEO Ryan Taylor declared, Ive never before seen the level of customer enthusiasm and demand that we are currently seeing from [AI platforms] in U.S. commercial. So, it appears that AI stock was swept up in a wave of general AI enthusiasm, courtesy of Taylor and Palantir.

Contrarian investors should start to hear the alarm bells ringing. C3.aiis a consistently unprofitable business. This isnt 2021, when borrowing costs were low and unprofitable, companies could just coast on hope and hype.

Palantir Technologies had a good quarter, but this doesnt necessarily mean C3.ai will also have a strong quarter. Overeager investors really need to watch out, as C3.ai is due to release its third-quarter fiscal 2024 results on Feb. 28.

Wall Street expects the company to report a net earnings loss of 28 cents per share. So, once again, C3.ai will almost certainly continue its track record of losing more money than its making.

Finally, investors should listen to the warning of Sam Altman, CEO of ChatGPT developer OpenAI. Clearly, Altman has an insiders insight into the AI markets past, present and potential future.

This might shock you, but Altman recently said that AI will change the world much less than we all think and it will change jobs much less than we all think. In addition, he cautioned that people are begging to be disappointed, and they will be.

If youre thinking about loading up on C3.ai stock now, stop and think about Altmans warning. Consider that perhaps the future growth expectations for C3.ai and other AI companies may have gotten out of hand. Then, adjust your AI stock outlook accordingly.

With C3.ais quarterly data release imminent, the stakes are high and so are the risks for investors. Therefore, Im sticking to my suggestion of letting C3.ai stock pull back before jumping in. $25 would be a good price to buy and $20 would be even better, so pick your price and just be patient.

On the date of publication, David Moadeldid not have (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines.

David Moadel has provided compelling content and crossed the occasional line on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

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C3.ai Stock Warning: Don't Get Carried Away With AI Euphoria! - InvestorPlace