Software Artificial Intelligence companies are disappointing I Really think this is the way forward that Software Artificial Intelligence Artificial Intelligence companies disappoint. That's mostly because remember what started the AI Revolution Let's start at the AI Revolution was Nvidia Nvidia following GPT right? We had GPT It's like look, oh my gosh, we have this incredible chatbot. What? Now We have services like mid-journey that you can plug into Discord and have beautiful images as well. And we need a lot of Gpus to process this sort of data and information and content creation.

And so we get a couple great pieces of software that turn into everyone in the world wanting to create another great piece of software, many of which just built on the backs of open AI uh, and then obviously subsequently Nvidia and otherwise And all of a sudden, there's this want that, all of the Legacy companies, the snowflakes of the world, the docusigns, the crowd strikes the cloudflare that all of a sudden all of them are going to become fantastic AI companies overnight. And so far that appears just not to be the case. especially after you read the earnings calls at Snowflake, where you get a really good heads up that, um, maybe the CEOs themselves aren't even that confident. But not only is it the CEOs that aren't even that confident about their ability to actually generate profits from artificial intelligence, but it might not even be sort of.

The tech Bros that are generating the biggest revenues for software might end up being Healthcare Which then the question is okay. Well, is it the healthcare companies themselves that are going to make most of the money or is it these other companies that are going to make money from AI That's the big question right now is who's actually going to make money from Ai and who it's not apparently is Oracle With apparently now suggesting that their results the street, now suggesting that the results of the Oracle earnings are raising questions about the timing of generative AI a demand turning into Revenue across the broader business cycle. and quite frankly I looked this I'm like duh like the whole AI stuff started about six months ago. Wow, this is really when things? maybe February So six to seven months ago, how do you expect these massive software companies to turn around uh and uh and and start all right, That's it.

We know exactly how to make money with this. they don't snowflake. Literally said it best in their last earnings call Snowflake And their CEO literally made the argument that you know everybody's kind of just been thrown into this foray and nobody's figured out how to make actual money from it yet except for NVIDIA and obviously therefore subsequently the chip manufacturer. So uh, my opinion is uh again, if you're looking at those software artificial intelligence companies, probably just something to keep in mind that it might end up taking a little bit more patience.

Now, one thing that uh, you know when it comes to software that people will software companies That people do like in the artificial intelligence play has to do with advertising and data centers and specifically Trade Desk uh Facebook meta and uh Google uh potentially still being uh and AWS as well as Microsoft potentially still being up there in terms of opportunities to invest in AI where you're kind of at that next layer where you've kind of got right if there's open Ai and then there's all the chip stack Underneath It All that has to run on servers. So how about the server providers Which Oracle is as well, right? And no surprise the these these server revenues those do well. but the question is, what about all the apps that run on them? Are those actually going to make money? And a lot of that is in much more doubt now than uh than people had hoped. Uh, but anyway, Anywho, I mean you look at sort of the hopium that went into some of these plays as well.

and here's Oracle look at the Opium he went from like 59 bucks in November straight up to 126 dollars. I mean okay, big deal, you're you're down eight percent now in pre-market but you're just back to this support level where you've been bobbing around before. so maybe it's actually not that crazy from a stock point of view. I Know when people hear oh my gosh, you know, stocks down eight percent or whatever.

even ten percent in the day. it's a big deal, but Stock's done very, very well here. so maybe this isn't that big of a deal from a stock price point of view. but in terms of this, happening again just wouldn't surprise me to see it happen again.

Uh, these, uh, these these Services uh are going to be I think a lot harder to sell than people think. mostly because every company is like oh yeah, we'll we'll turn on the AI button maybe AI businesses aren't really going to be able to figure out profitability. This is actually something that we've talked about since the beginning of the whole AI dilemma. The beginning of the whole AI dilemma I suggested probably the best place to invest would be chips and I was also heavily exposed to chips and I wasn't saying that to be biased, it was just simply to say that if everybody goes all in on AI the one place you can guarantee is going to make money or the chips look okay what Intel's doing lately.

it's one of my favorite value stocks I have a good chunk of exposure to it's been doing excellently I Actually still think it's highly undervalued, but it's not just Intel which is launching its own three nanometer Fab Uh, actually that is going online here in 2024, but it's TSM It's Asml. It's it's your Nvidia it's your AMD And my concern was that the SAS companies would not be able to catch up with with actually providing accelerated revenues because they won't be able to figure out. Okay, how do we now convince people to actually spend money on AI The Slowdown that we've noticed yesterday in the Snowflake Optimism in their last earnings call which I encourage you to read. Somewhat foreshadowed what C3ai talked about.

which I want to talk about in this video, but just to quickly remind you in the snowflake analysis, we realized that in Snowflakes earnings call even the CEO feels unconfident about how much AI Revenue there's going to be. They feel like companies are sort of getting thrown into sort of jumping into the pool of AI and then everybody's kind of like okay, now what? like how do we make money here C3ai which in my opinion is mostly a fraud. Uh, okay, that's a harsh word. Maybe they're not a fraud I just think they're like I I think their product is not really proprietary I think their product is their stock I'm being very aggressive here because I don't like the company I think it is a company that is going to perform very poorly and have actually always been pretty anti-c3 AI I I Think that mostly you have institutional investors who are like I need AI exposure.

Let me put AI into Robin Hood oh oh C3ai Enterprise AI oh invest. That's honestly how I feel about CTR C3ai like I think the only reason stock is actually performed decently this year is because people are not looking at the fundamentals of C3i because they're trash. I'll pull them up too. But most importantly, we got to talk about what's recently happened here.

So you've got C3ai. It's up about 149 year to date. I Actually think it has a lot more to follow and it has recently Fallen a chunk. You can see that here from its highs right around.

August 1st, it's not about 37 percent highs around the middle of June it's down even more down about 40 percent. You've been on a recent downtrend here with a little bit of a recent correction over just the last couple days here of about 12 and so a lot of folks wondering Okay Kevin what what happened? well I I You know I don't know, but we're gonna find out together. All right, ready and then we'll go look at the fundamentals of it. So C3ai gave lackluster sales, four tasks and set profitability will take longer than expected fueling anxiety.

The software company is struggling to capitalize on an enthusiasm for artificial intelligence folks. This is absolutely no surprise. This is exactly what I've been saying on this channel since the AI hype began. It's going to be very difficult for these companies to actually convince, especially regular consumers to just spend a lot of money on AI Most consumers have no idea what they're doing with artificial intelligence and I'm not saying that to like insult people.

it's just I think people have gone in they've tried GPT 3.5 they're like haha that's kind of cool and then they never use it again. You know they find an excuse to never use it uh like and not as a pitch but like one of the one of the courses I made how to make more money and get sh9t done faster is on productivity and building your income and that you can see all the courses at me Kevin.com We have a whole AI section at and what I designed the AI section around is how can you actually use AI Like not. Oh let's find every AI tool that exists in the world and go Wow! Look they're 2 000 AI tools. Nobody cares about your 2000 AI tools.

Most of these companies are going to go straight bankrupt. like if I were a venture capital fund I would be allocating pretty little to all these crazy AI software companies unless they really were able to prove that they actually had a revenues which I actually don't think they're going to be able to do. So what you end up stuck with is a lot of companies burning a lot of money on server usage and most of them were going to go bankrupt and then you'll see Server usage stabilize and then demand for like Nvidia chips and all that sort of stabilize. But I do think it's interesting because you know you can jump on over to some of these.

and I want to look a little bit more at some of this news headline, but this was from uh, this was the nine months ending in Jan January So not the most recent earnings report, but the one that I was basing my frustration on on C3ai. Here's a company that loses a hundred and at least about 50 million dollars a quarter, 142 in nine months and uh, plant property. and Equipment if you look at free cash flow, you're actually about 200 million dollars lost in a nine month period. If you look at Revenue growth over the year, their subscription growth is flat, their total revenue is actually negative, their gross profit is negative, which means their net loss almost doubled.

So uh, it's just disgusting. They've got about 800 million dollars of cash, about 60 million dollars of bills, so they still have cash. They could last a few years and they'll end up burning this and I think bleeding out unless they can figure out how to make some more revs. But anyway, the fiscal year adjusted loss is now expected to be as much as 100 million dollars in actual loss.

So when you considering a cash flow, it'll be even more than that. And previously uh, released forecasts, they were expecting a loss of about 75 mil. So actually expecting more of a loss? That's kind of crazy because it's like we're expecting a 75 million loss Now we're losing more money. Or yeah, now Ai comes out and guess what, we're losing even more buddy.

Oh geez, it's just embarrassing. Uh, so C3a I said it no longer expects to make a profit on an adjusted basis in the fiscal fourth due to new Investments they're making into. Oh yeah, okay, listen to this. Oh, that's see.

This is another thing I absolutely despise. Okay, they're not making new investments into R D You ready for this new investments into sales and marketing? Oh no, no. Like if you I mean like there's some level of sales and marketing? Obviously that's necessary. Uh, like for example, if I say your opportunity to buy any of the individual courses uh, on building your wealth stocks, you're to millionaire uh, real estate investing, building your wealth whatever uh is is going to go away because they're all going to be bundled together as one larger and more expensive software you know, set of software.

uh and uh and it'll be more expensive if you don't buy soon. If I don't mention that, then obviously you don't sell. But then if you just if the only way you're trying to grow is not by innovating, doing research and adding more value to your product which I do all the time and all you're just doing is running more like Google ads. Let's say then then are you really a good product? I I don't think so.

Yeah, personally, I don't run Google ads. Maybe we should. a little bit. a little bit of remarketing never hurt.

but anyway, the market opportunity is immediate and we intend to seize it. Says the CEO right? They intend to seize it. not with more R D, but rather with marketing more. Yes, yes, let's Market the stock more because that's actually usually all I See them, the market.

It's kind of crazy. Some investors will remain skeptical about the company. Uh, it is the most shorted U.S stock as a percentage of shares traded. Wow.

Really. Let's look at the uh, short interest here. Let's see here. So if I go to the apps portal, I'll go ahead and pull this up.

but I'll keep reading this in the meantime. so see through. AI But shortage shares have recently dropped a bit. C3a I projected sales 72 to 76 current period lower from the average estimate of analysts.

Okay, great. Oh yeah, this was another big thing with C3ai. I Remember going through this when I went through their last earnings call that they have one client that represents one third of the business. Yeah, actually I think I have it I have it highlighted in here somewhere? Uh, but it was Baker Yeah, here it is.

Baker Hughes Uh, basically Baker Hughes makes up about one third of their revenue. And this is an oil field contractor. and what's kind of wild is this company actually sold about one third of the stake they had in C3ai which a lot of people are looking at and saying is a signal that Baker Hughes is like yo The AI you guys have isn't that great so we're just gonna start. like dumping some of your stock.

as we you know try to recoup what we can on the fact that we're stuck in a contract with you. Oh Rip! So anyway, the C3 AI hype. Not a surprise that you're suffering. Not a surprise that DocuSign is complaining.

Not a surprise that Snowflake is complaining. That's what's made me very nervous about the software. Uh, Stack for artificial intelligence. but uh oh well.

advertise these things that you told us here. I Feel like nobody else knows about this? We'll try a little advertising and see how it goes. Congratulations man, you have done so much People love you people looked up to you Kevin path right there financial analyst and YouTuber meet Kevin Always great to get your take.