C3.ai, Inc. (AI): A Bear Case Theory

We came across a bearish thesis on C3.ai, Inc., High Growth Investing’s Substack by Stefan Waldhauser. In this article, we will summarize the Bears’ thesis on AI. C3.ai, Inc.'s share was trading at $23.41 as of June 23^rd.

C3.ai has struggled to gain solid financial footing despite being in business for over 15 years and forming high-profile partnerships with Microsoft Azure and McKinsey. While its revenue growth has reached 24% on a trailing twelve-month basis, the company continues to operate inefficiently, posting net losses that hover around 80% of revenue and maintaining negative cash flow. With a Rule of 40 score of just 14%, the business model remains fundamentally flawed.

A major concern is C3.ai’s reliance on a limited customer base, most notably Baker Hughes, which contributes around 20% of total revenue. This key contract is set for renewal and may expire as early as June 2025, posing a significant risk to the company’s financial stability and stock performance. For fiscal year 2025, C3.ai is projected to generate nearly $400 million in sales while incurring a $300 million loss, a mismatch that renders its $2.5 billion valuation difficult to justify.

The market appears to share this skepticism, as evidenced by a 30% drop in the stock year-to-date. Furthermore, substantial insider selling by CEO Tom Siebel and his management team reinforces concerns about internal confidence. Short sellers have also targeted the stock aggressively, as reflected in its elevated short interest levels.

Tools like the stocks. Guide screener reveals that C3.ai is among the most shorted stocks in the NASDAQ-100, underscoring bearish sentiment. Overall, the company remains an unprofitable and risky bet, with mounting pressure from both operational inefficiencies and investor skepticism.

Previously, we covered a bearish thesis on CrowdStrike Holdings, Inc. (CRWD) by Magnus Ofstad in May 2025, which highlighted concerns over slowing growth and stretched valuation. The company’s stock price has appreciated by approximately 8% since our coverage. This is because the thesis didn’t play out as expected. Stefan Waldhauser shares a similar view but emphasizes C3.ai’s structurally weaker fundamentals.

C3.ai, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held AI at the end of the first quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of AI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.

READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.

Disclosure: None. This article was originally published at Insider Monkey.