What Happened?
Shares of enterprise AI software company C3.ai (NYSE: AI) fell 5.3% in the morning session after the stock was caught in a broader sell-off among artificial intelligence (AI) stocks amid growing investor concern that the sector's recent boom might be an unsustainable bubble. The sector-wide drop appeared to be triggered by peer company Palantir Technologies, whose shares fell more than 6% despite reporting earnings and revenue that beat Wall Street estimates. The negative reaction to Palantir's results seemed to ripple across the industry, impacting other prominent AI-related companies. This event fueled worries among investors that the rapid rise in AI stock prices had created a bubble, leading many to sell shares and lock in recent profits from stocks with high valuations.
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What Is The Market Telling Us
C3.ai’s shares are extremely volatile and have had 41 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 13 days ago when the stock dropped 4.3% on the news that new trade tensions and disappointing earnings from major tech companies weighed heavily on investor sentiment.
A key driver was the news that the White House considered new restrictions on Chinese exports that use U.S. software, a move that could significantly impact technology companies. This uncertainty over escalating trade tensions created a broad sense of worry in the market. Simultaneously, shares of the semiconductor giant Texas Instruments dropped 6% after its latest earnings and future revenue forecast both came in weaker than expected, which is a big concern for the health of the tech industry. This poor performance from Texas Instruments immediately dragged down the entire semiconductor sector, causing other major chipmakers like Advanced Micro Devices and Micron Technology to also see significant declines.
Compounding the bad news, streaming service Netflix saw its stock slump 9% after it missed its earnings targets, partly blaming a tax dispute in Brazil. The combined effect of renewed trade war fears and the direct evidence of underperformance from influential companies in the technology sector was enough to push the major market indexes lower.
C3.ai is down 54.1% since the beginning of the year, and at $15.90 per share, it is trading 63% below its 52-week high of $42.94 from December 2024. Investors who bought $1,000 worth of C3.ai’s shares at the IPO in December 2020 would now be looking at an investment worth $171.91.
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