C3.ai: A High-Risk, High-Reward AI Stock

C3.ai's $C3.ai(AI.US)$ shares have been rocked by an open letter from a short seller raising concerns about the company's accounting practices, sending its shares volatile. While shares are down about 32% in April, they are still up about 104% year-to-date. But should investors buy the stock amid the recent valuation pullback, or is the downside risk still too big?

On the pessimistic side, Kerrisdale Capital's open letter to C3.ai's auditors raises questions about the company's accounting practices and changes to its chief financial officer. While the company has addressed some of these concerns, questions about future revenue, unbilled receivables and gross profit will need to be answered in future earnings reports. There is still some uncertainty about whether future artificial intelligence technology can truly become a catalyst for business, and the company's valuation, which is highly dependent on growth, does not match recent business performance.

On the bright side, C3.ai's sales growth potential is so strong that management expects to be profitable on an adjusted basis next year. C3.ai is well capitalized with nearly $790 million in cash and equivalents. If the company makes headway in AI software and services, it could be a big winner in the AI revolution.

Overall, while short sellers may not short C3.ai stock, investors should be cautious about this high-risk, high-reward artificial intelligence stock. While there are potentially high returns, the uncertain business outlook and valuation make C3.ai a speculative investment.