The Case for

Brit Ryle

Posted February 13, 2023

It’s not unusual for an emerging investment trend that’s been percolating to burst onto the scene with a frenzy of hype after a momentous event. This happened for Artificial Intelligence (AI) two weeks ago when Microsoft released a flurry of news about the ChatGPT AI app. 

Microsoft said it was investing another $10 billion in the ChatGPT parent company, OpenAI. This investment gives Microsoft 49% ownership of OpenAI. Microsoft went on to say that it was releasing a new version of its Bing search engine that incorporates ChatGPT. And then we learned that the first public version of ChatGPT released in November attracted over 100 million users in a month, making it the fastest growing app in history by a wide margin.

Put together, all these items say that AI is no longer percolating, it is happening now. And Microsoft is planning for AI to be an integral part of its future.

We’ve probably all seen reports of what ChatGPT can do. It’s a “natural language processing model,” meaning that its results are presented as if written by a human. And it is apparently pretty good at writing everything from children’s books to college essays. 

But the real disruptive potential came when Microsoft said it would integrate ChatGPT into many of its software products (like Excel) and also into its Bing search engine.

Now, putting a chat enabled feature that can produce the type of results that ChatGPT is capable of into a search engine is a potential game changer for search. We all know Google dominates the search market, “search” and “google” are synonymous. And Google took in $175 billion in revenue for 2022 from its ad business, serving ads in its search results. 

Microsoft is clearly betting that its AI powered Bing search engine can take market share away from Google. And it could be significant – a preview of the new Bing search engine became available on February 7. Over a million people registered for the preview on the first day. 

To sum all this up: the reason AI stocks have rallied is because of the perception that AI is coming out of the lab and into the real world and will start making real money. 

An AI Moneymaker

I added (NASDAQ: AI) to my watch list six weeks ago when it was trading around $15 a share because it is an AI company that already has customers and revenue. 263 customers, to be exact, who generated $270 million in revenue for over the last 12 months. 

It would be easy to assume that the launch job for shares that took them to just over $30 on Monday February 6 was solely due to the flurry of AI news out of Microsoft. Of course, that helped. But it wasn’t the only catalyst…

On January 31, announced it is launching its C3 Generative AI Product Suite on March 23, 2023.

From the press release: C3 Generative AI for Enterprise Search provides enterprise users with a transformative user experience using a natural language interface to rapidly locate, retrieve, and present all relevant data across the entire corpus of an enterprise’s information systems.

Ummmm, yeah. That statement right there might set a record for the amount of unintelligible jargon in one sentence. My eyes still glaze over a little when I read it…

But it’s actually a very significant development, and I’m going to unpack it for you now. To do so, first we need to dig into what does for a living now…

An Old Dog with New Tricks

The company now known as was founded in 2009 by Thomas Siebel. Before, Siebel was the founder of Siebel Systems in 1993, a customer resource management (CRM) software company that was bought out by Oracle in 2006. 

At its inception in 2009, Siebel’s new company was focused on Internet of Things (IOT). He changed the name from C3 IoT to in 2019 to account for the shift in the company’s focus. calls itself an “Enterprise AI” company. That means it provides a platform upon which companies can run automated AI programs to monitor and report on various aspects of the business. 

Companies like Baker-Hughes, Shell, ConEdison, Cargill, and Koch Industries are all using to develop AI programs that monitor and report on the vast amounts of data the companies generate. The AI programs are developed in conjunction with programmers and run on’s platform.

As an example, with $300 billion in revenue, Shell Oil is among the 10 biggest companies in the world. It operates oil drilling platforms, refineries, storage facilities, pipelines, etc…

Shell says it has 500,000 valves across its operations, any of which could fail and cause problems. Of course Shell has an understanding of how valves fail, and what kind of symptoms indicate a valve might be failing. But the actual monitoring of all those valves is a different challenge. 

And so Shell’s working with on an AI monitoring and reporting system that can identify a problem valve before it breaks and report a potential failure unprompted. Shell says successfully identifying and correcting failures before they occur can save the company “2 or 3 percentage points” of revenue every year. 

Once an AI program like the one at Shell is operational, it will run on’s platform, which means there’s recurring revenue in addition to the initial development revenue. 

Right now, offers AI programs for things like fraud detection, customer churn, energy management, predictive maintenance, inventory optimization, supply network risk, etc. 

There’s nothing particularly ground-breaking about a company that wants to improve its fraud detection or monitor supply chain risks. But the possibility of having custom programming running perpetually that can save a company a few percentage points of revenue a year is compelling. 

Google for the Enterprise

Creating these AI programs is one thing. But for a small company like, the data systems to process everything is a whole different challenge. That’s why is partnered with Microsoft Azure, Google Cloud and Amazon Web Services. Its platform runs on each of these companies’ giant cloud computing networks. 

Amazon Web Services customers can build an AI application on’s platform. The same is true for Microsoft Azure and Google Cloud customers. In other words, is a first mover in the enterprise AI space, and its products are easily accessible with the biggest cloud computing companies. 

That’s a big reason why revenue has jumped 47% since fiscal 2021. 

Which brings us to the new product offering, the aforementioned AI Generative Product Suite. 

First of all, let’s define what “generative AI” actually is. The simplest definition I’ve found is from the World Economic Forum: Generative AI is “…a category of AI algorithms that generate new outputs based on the data they have been trained on.” 

The partnerships with Microsoft, Amazon and Google mean that is allowed to integrate each of those companies’ generative AI products into its own offerings. If you access’s platform through Microsoft’s Azure, it will include ChatGPT. This means the user can ask the AI program a question, the program can then search through the available enterprise data and come back with a natural language answer.

For instance, is working with the Department of Defense to build what the DoD called “a Google for the DoD” – a natural language search tool capable of analyzing millions of data points very quickly. 

Just last week, was awarded a contract to build AI applications for the U.S. Air Force Crowd-Sourced Flight Data Program.

These are both important customers to have. And success with them will certainly lead to more and bigger government contracts.

The Valuation Problem

It is clear that has compelling products and significant customers. Contracts with the Air Force and Department of Defense are particularly impressive. 

The company also has some momentum, as evidenced by the 47% revenue growth put up since the company reported $183 million in revenue for fiscal year 2021. Trailing 12 month revenue is currently $269 million. 

However, revenue for the final two quarters of the current fiscal year are expected to come in lower than last year – $133 million vs $142 million. Now, this drop of revenue doesn’t necessarily mean that its business is weakening. Rather, it’s the result of a change in pricing. has switched to consumption pricing as opposed to subscription pricing. Instead of paying one fee for everything, is only charging companies for what they actually use. The intent is clearly to make’s product offerings more attractive to new customers. And the new pricing also suggests a confidence that new customers will want more. Which is why revenue is expected to jump 21% to $316 million in the next fiscal year. currently has a market cap of $2.5 billion. It’s trading just under 10x revenue. That’s a bit on the expensive side, but not out of line with valuations you see with emerging tech companies with significant growth ahead. 

The company has $840 million in cash and virtually debt, so we shouldn’t expect any secondary offerings of stock to raise cash.

And so, as with so many other stocks out there, the share price will likely be more influenced by the bear market, a potential recession and investors’ risk appetite. 

I believe should be owned, because of its potential as one of the few AI stocks that’s generating revenue. At the same time, it should be understood that the share price will likely go lower along with the overall stock market if the economy worsens. So, the best strategy is to start a buying program for shares of That is, buy some shares now, but plan on adding to your stake on a regular basis over coming months. 

That’s it for me today, take care and I’ll talk to you on Wednesday

Briton Ryle
Chief Editor and Strategist
Pro Trader Today