Prediction: 2 AI Stocks That Will Be Worth More Than C3.ai 2 Years From Now

C3.ai, despite recent top-line growth and a key deal extension with Baker Hughes, faces challenges in profitability and customer concentration, leading analysts to project a potential market cap decline over the next two years; the article suggests considering Applied Digital and DigitalOcean as alternative AI-driven investments, citing their growth potential and strategic positioning in the cloud and data center sectors, with Applied Digital potentially benefiting from its REIT transition and DigitalOcean from its focus on smaller cloud customers and AI workload integration.

Analysis

C3.ai (AI) presents a challenging investment case, currently trading nearly 40% below its IPO price despite recent top-line growth acceleration in fiscal 2024 and 2025 and a three-year extension of its critical deal with Baker Hughes, which accounts for over 30% of its revenue. The company's growth has historically been inconsistent, accompanied by accumulating losses and significant customer concentration. With a valuation at 7.5 times current fiscal year sales against a consensus analyst expectation of 19% compound annual revenue growth from fiscal 2025 to 2027, C3.ai is not perceived as inexpensive, particularly as it is not expected to achieve profitability soon due to increased investment in new AI services. Projections suggest a potential 6% decline in its $3.5 billion market capitalization over the next two years if it meets growth estimates but trades at a more modest 5 times forward sales. In light of these factors, the article highlights Applied Digital (APLD) and DigitalOcean (DOCN) as alternative AI-driven investments. Applied Digital, which builds and leases data centers to major cloud and AI firms, is undergoing a transition to a REIT and analysts forecast a 48% compound annual revenue growth from its fiscal 2024 to 2027. However, APLD trades at a higher 13.5 times projected fiscal 2025 sales, and its outlook is subject to revision following the planned divestiture of its capital-intensive cloud computing segment. DigitalOcean, which caters to smaller cloud customers and is integrating GPU-powered AI capabilities, is firmly profitable and trades at 3.1 times current year sales with a $2.7 billion market cap. Analysts project DigitalOcean's revenue and EPS to grow at compound annual rates of 14% and 12%, respectively, from 2024 to 2027, suggesting potential for substantial market cap appreciation or attractiveness as a takeover target.

Key Decisions for Investors

• Investors holding or considering C3.ai should meticulously evaluate its path to sustained profitability and customer diversification, as its current valuation of 7.5 times sales faces headwinds from ongoing losses and a projected 19% revenue CAGR that may not prevent a market cap decline.
• Applied Digital offers exposure to the high-growth AI data center market and a potential dividend stream via its REIT transition, but its premium valuation (13.5x projected FY25 sales) and the strategic uncertainty introduced by the divestment of its cloud segment require careful monitoring of execution and revised growth estimates.
• DigitalOcean represents a potentially more compelling risk-adjusted opportunity in the cloud and AI sector, characterized by existing profitability, a lower valuation at 3.1 times sales, steady growth forecasts (14% revenue, 12% EPS CAGR), and strategic moves into AI workloads, which could unlock significant shareholder value or attract acquisition interest.