What Happened?
Shares of artificial intelligence (AI) software company C3.ai (NYSE:AI) jumped 7.1% in the afternoon session after stocks soared, led by the Nasdaq, which climbed 1.2%, while the S&P 500 also increased by 0.5% amid continued positive momentum. Investors are bracing for the outcome of the Fed's policy meeting later in the week, with overall sentiment indicating that markets anticipate no major surprises. The consensus expects the Fed to cut rates by 0.25% during its final committee meeting of the year. Recent economic data, including the November 2024 CPI report, continue to support the soft landing narrative—indicating that the Fed can control inflation without harming the economy.
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What The Market Is Telling Us
C3.ai’s shares are extremely volatile and have had 34 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 5 days ago when the stock dropped 9.1% on the news that JP Morgan analyst Pinjalim Bora downgraded the stock's rating from Neutral to Underweight and assigned a $28 price target, citing a stretched valuation. The price target implied a potential 27% downside from where shares traded when the downgrade was announced, The analyst added, "Given the already rich valuation, which is likely already pricing in a much better growth-plus-profile, which we find difficult to underwrite currently, we expect shares to underperform our coverage for 2025.".
C3.ai is up 47.2% since the beginning of the year, and at $42.19 per share, has set a new 52-week high. 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 $457.35.
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