Is C3.ai Hype Or Hope For Investors? Short-Seller Spruce Point Capital Questions Company's AI Tech

Shares of C3.ai Inc AI surged following the announcement of its partnership with ChatGPT, but not everyone is convinced of the company's profitability.

What Happened: Short seller Spruce Point Capital reaffirmed its recent report on C3.ai Tuesday, doubling down on claims that there is limited evidence that the company generates profits. C3.ai replied with what Spruce Point calls "puff pieces" to four questions it had.

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According to Spruce Point’s short report issued last week, C3's generative AI product has no mention in any SEC filing, and interviews with former employees suggest that there were no generative AI products in the company's pipeline.

The report also questions the significance of C3's partnership with Microsoft Corp MSFT and the company's profitability and cash flow, among other things.

Spruce Point recently interviewed a former C3.ai sales executive familiar with its technology product offering. The executive disagreed with the excitement around ChatGPT and the hype around the company's generative AI product.

They said that generative AI is AI-related, but it's just not significantly related to the other types of AI that C3 has been doing. The executive is not convinced that ChatGPT is "completely a neutral system" and said that C3.ai "is not in the market space, but they will benefit from, dare I say, the hype around it."

Why It Matters: The short report casts a shadow on C3.ai's recent press release, which excited investors by announcing the launch of a Generative AI Product that will integrate OpenAI and advanced models like ChatGPT.

The report suggests that the launch could be opportunistic and in advance of any customer use case.

The report's questions around C3.ai's profitability and cash flow could be a concern for investors, as C3.ai has yet to turn a profitable year and will notch its biggest loss in its history in FY23 of around $100M.

Price Action: Shares of C3ai are trading 9.14% lower to $21.66, according to data from Benzinga Pro. 

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