C3 AI’s Fortunes Could Recover Along With the Energy Market
InvestorPlace - Stock Market News, Stock Advice & Trading Tips C3 AI has suffered heavily this year, but there's light at the end of the tunnel. A recovering energy industry...
C3 AI (NYSE:AI) stock has undoubtedly been a losing investment thus far.
It peaked at $180 during last year’s massive tech rally and proceeded to then lose a large chunk of its value. Momentum has left AI stock and a clear negative sentiment has taken root.
However long-term investors should not lose the forest for the trees. There still remains plenty of reasons to like AI stock.
C3 AI’s Open Initiative Could Open Doors
C3 AI and Shell’s (NYSE:RDS) partnership is starting to bear fruit. In a joint statement, C3 AI and Shell announced three AI products that will be available through the Open AI Energy Initiative. This initiative allows the sharing of AI models for participants in the energy industry. These models include physics-based AI models designed with the intention of improving the reliability and performance of energy assets. These models are built upon the company’s AI suite and Microsoft (NASDAQ:MSFT) Azure.
The three new AI models Shell has made available publicly are:
- Shell Process Optimiser for LNG – The model enhances asset production by helping engineers manage key identified optimization levers. Optimum settings are calculated by integrating sensor information, such as pressure, temperature and flow rate.
- Shell Corrosion Advanced Risk Modelling and Analytics – The model uses data analytics and AI to predict corrosion and degradation before leaks happen. It does this by collecting and analyzing a large amount of onsite data.
- Shell Autonomous Integrity Recognition – Uses “machine vision” to assist inspectors in identifying and classifying external corrosion and insulation issues before they result in leakages. Inspectors using these tools become more efficient as it reduces time spent troubleshooting issues and paperwork.
I like going through what exactly do these products do. C3 AI can sometimes be confusing for investors as its products aren’t straightforward. Therefore, I find it a useful exercise to boil down to the essence of what these AI products actually do and how can this be a benefit to a potential enterprise customer.
After reading through examples of what an AI model actually does, it’s easy to see the possible benefits. While focusing on issues in the energy sector, I can see this being adopted by a wide variety of industries.
The challenge of course for any new technology will be adoption. This is the aim of this initiative from C3 AI’s perspective. By making these models available to the wider energy industry, C3 AI is hoping that it would see an uptick in the adoption of its models.
Strong Energy Sector to Benefit C3 AI
I know that C3 AI’s revenue growth has been sluggish the past few quarters. Certainly not enough to justify a high valuation causing AI stock to downtrend from its all-time highs of $170 all the way down to its current price of less than $38.
Recall that C3 AI is heavily dependent on customers from the energy industry. Therefore the downturn of the energy industry in 2020 and the early part of 2021 has really put a hurting on C3 AI’s top-line revenue growth.
The industry recovering in the latter part of 2021 could mean that things might be looking up for C3 AI. Although pulled back from recent highs, Oil prices still remain at five-year highs. This is good news for oil producers who could be seeing windfall profits from the high prices.
There is a potential that the better fortunes at the energy companies could translate to more sales for C3 AI. Enterprise clients may no longer be as constrained with their budget and be willing to invest in AI products to improve the efficiency of their operations.
Investor Takeaway for AI Stock
At this time, AI stock is still in a clear downtrend. I am unsure how long this downtrend may last or what the bottom will eventually be.
However, as I have indicated before, AI stock is an investment with a 10-year time horizon. I am a firm believer in the potential of C3 AI and the company’s ability to bring AI solutions to the mainstream.
On the date of publication, Joseph Nograles held a LONG position in AI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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