Elon Musk Founds New Company To Challenge GOOGL, Microsoft's ChatGPT; Is AI Stock A Buy?

AI stock surged earlier this month and is rising after a pullback. Technical analysis suggests the stock is undervalued, and fundamentals support this conclusion.

Elon Musk Founds New Company To Challenge GOOGL, Microsoft's ChatGPT; Is AI Stock A Buy?

Elon Musk, the CEO of Tesla (TSLA), has launched an AI company. Musk incorporated X.AI, his new AI company, in Nevada on Friday. Musk is the only director of the startup and intends to sell 100 million shares privately.

Musk and others had requested a six-month break in AI system training, which involved technologies that were more advanced than GPT- 4 in March.

What does this mean for C3.ai? Stocks rose by nearly 5% Monday, as the AI race took a new direction. Musk's company counts Alphabet parent Alphabet, OpenAI and C3.ai as its competitors.

Musk reportedly made an offer for OpenAI in 2018, which he founded with others in 2015. The Tesla CEO resigned from OpenAI when his offer was turned down. Musk quit due to a conflict of interest, as Tesla was testing its own AI-powered auto driving software.

OpenAI was also facing astronomical costs at the time associated with training AI. ChatGPT, a maker of ChatGPT, transformed in 2019 from a "non profit" company to a "for-profit". This attracted Microsoft (MSFT), who invested heavily into its ChatGPT.

Sources claim that OpenAI had a $30 billion valuation by March of this year. Musk tweeted that "a $30B for-profit market cap somehow evolved from a non-profit."

Tesla's CEO has quickly caught up to his new startup.

AI Stock Rises On New Entrant In AI Space

AI stock is having a turbulent April. After Kerrisdale Capital, a short seller, raised concerns about AI's margins and unbilled receivables with client Baker Hughes. Shares plunged. AI shares rose when the company responded.

Stocks are still below the 50-day average, but they're on alert as news about Musk's venture causes them to rise from their recent lows.

Tom Siebel, CEO of C3.ai, believes that AI applications will reach $600 billion by 2020 as everyone will use enterprise AI.

This is much less than Cathie's prediction. Wood, in Ark Investment Management's report "Big Ideas 2023", sees AI as adding $200 trillion to GDP by 2030.

AI stocks have the first mover advantage and are promoting partnerships with Alphabet parent Alphabet, Amazon (AMZN), Microsoft(MSFT), Accenture(ACN), Baker Hughes BKR and others.

AI Stock Earnings Still in the Red

AI stock reported sales at $66.7 million for the last quarter. This is down 4% from $69.8 millions. It still exceeded the guidance of $63-$65m. AI reported a net loss of 6 cents per share, which is slightly better than last year's loss of 7 cents.

Thomas Siebel, CEO of the company, stated that "overall sentiment" appears to be improving compared to mid-2022. He sees profitability in fiscal year 2024.

The generative AI shares disclosed $789.8 millions in cash as a way to get through the "turbulence" of the equity market. This cash will be used to "invest in growth by investing in enterprise AI innovation and expanding sales."

Stocks Surge on ChatGPT Success

In February, the stock skyrocketed when users were able to use OpenAI's ChatGPT app, which uses artificial intelligence, to generate texts, emails, and even books. AI stocks will benefit from ChatGPT and other applications.

C3.ai offers enterprise AI applications, but not for consumers. C3.ai can benefit from the consumer apps such as ChatGPT, because they can be integrated with the platform.

In just two months, the ChatGPT app surpassed popular apps such as TikTok or Instagram in terms of monthly active users. OpenAI and Microsoft's (MSFT) ChatGPT partnership uses natural language to help users write emails, code and find answers to daily questions.

The Redwood City-based company creates AI-enabled applications that can serve different purposes. Software can improve network reliability, detect fraud, balance inventory and demand, solve supply chain problems, and increase energy efficiency. It can help with anti-money launder and customer interface.

C3.ai's products are ideal for enterprise CRM systems that automate to reduce errors and costs.

AI Stock IPO

AI stock opened at $42 per share on December 2020's first day of listing.

In less than two weeks, the stock price jumped from 11,19 dollars at the end 2022 to 30,92 dollars earlier this month. The Composite Rating is 71, which is below the desired level of 90. The Composite Rating is clearly affected by the low 44 EPS rating. The 98 Relative strength Rating is a testament to the stock's performance compared with the other stocks in IBD's database.

It has a mediocre "C-" Accumulation/Distribution Rating and mutual funds own only 34% of shares, according to IBD MarketSmith.

Stocks with a strong record of earnings and sales growth, which offer clear points to buy from the base are good picks according to CAN SLIM's investment strategy. AI stock broke out of its base after the news. Its earnings are still under review.