C3.ai (NYSE:AI) shares stormed out of the gate Tuesday morning, gaining 13.2% through 9:50 a.m. ET after announcing a “strategic alliance” with software powerhouse Microsoft.
Artificial intelligence (AI) applications specialist C3.ai and artificial intelligence server farm operator Microsoft highlight each company’s respective strengths and say they will work together “to enhance existing capabilities and bring new innovations that will help our joint customers maximize the delivery of high-quality business AI solutions with Azure.”
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More specifically, Microsoft plans to integrate C3.ai’s AI application software into the Microsoft Commercial Cloud Portal, align C3’s apps with new Azure capabilities, and collaborate to bring C3’s products to market and deliver to customers.
Going forward, Microsoft will be “the cloud provider of choice for C3 AI offerings.” And conversely, C3.ai will also be “a preferred provider of AI application software on Microsoft Azure.”
But write down the details. As you would expect in a relationship between a smaller company like C3, with a market cap of $3.8 billion, and a titan like Microsoft, whose market cap is greater than $3 trillionMicrosoft will become “the” provider of choice for C3 apps, but C3 will only become “a” provider of choice for Microsoft.
It seems to me that that is probably a distinction with a difference. It suggests that C3.ai investors may be overreacting a little bit to today’s news.
Remember: in the same press announcing this new alliance, C3 also notes that this is indeed the case al in a strategic alliance with Microsoft – as has been the case for the past six years. Also note that today’s press release contains no actual figures, no predictions of new revenues or profits for C3 that will result from this new alliance. Finally, keep in mind that despite having an existing alliance with Microsoft, C3 lost $280 million last year and is expected to continue losing money as long as analysts make estimates.
C3.ai remains a risky stock and is not for sale.
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