C3.ai, not Microsoft, is the real beneficiary of ChatGPT

News Summary:

  • At the other end of the spectrum and more active in the shadows is C3.ai (NYSE:AI), whose CEO Thomas Siebel is the transforming mind behind ERP (enterprise resource planning) allows companies to better manage their resources and people.

  • With a $10 billion investment in OpenAI, Microsoft (NASDAQ:MSFT) appears to be opening up Pandora’s capabilities with ChatGPT, which could even benefit search engine Bing’s efforts to capture keep up Alphabet (GOOG)(GOOGL) Google.

In terms of price action, since November 30, following the launch of ChatGPT, C3.ai stock has skyrocketed, nearly 99% compared to just 1.26% for Microsoft.

I start with how Microsoft wants to go strong with ChatGPT. Coincidentally, the increasing intensity of discussion on ChatGPT, which essentially consists of using a chatbot-like interaction instead of a search box, since earlier this month has coincided with a rise in Microsoft’s stock and contributed part to boost investor morale after the company slipped to the top. -line estimates for second-quarter 2022 financial results. The revenue deceleration could continue into fiscal 2023, which ends in June when the company is downsizing, but that could changes when using OpenAI’s GPT-3 to translate natural language, or the words you and I communicate with, into computer instructions. . Examples include enhancing the productivity of Office software from Microsoft PowerPoint and Excel, and bringing in more automation features.

Currently these two companies are partners for C3’s AI platform and Microsoft’s Azure cloud, but with the advent of ChatGPT, they can become competitors and my goal with this thesis is to evaluate see if investors have reason to trust Siebel’s company. with a ready-to-use product, is about to benefit even more as the software giant invests billions of dollars in research and battles Alphabet’s Bard for chatbot supremacy.

There are more opportunities with Bing, Microsoft’s search engine, where ChatGPT can provide more personalized search results based on a conversational approach and better summarize the content of web pages.

Now, the addition of interactive chat features can certainly help Bing improve its US market share by less than 8.7% for search engine (22nd figures) over the market leader Google holds 84.7%. However, as circled in orange above, it will also depend on how Microsoft engineers can integrate ChatGPT with Bing.

Also, as seen above, based on results obtained from ChatGPT on how to improve Google search using AI, there are many ways that innovative computing can help you. In this regard, behind Google’s simple search box, Alphabet has used analytics including complex algorithms for various purposes, such as knowing which user profiles are accessing which items.

Thus, while everyone’s focus is on the rivalry between the two tech giants, including the billions of dollars that Microsoft has spent on conversational AI, C3’s organic growth looks more favorable to them. cash, especially in an environmental economy where monetary policy is tight and likely to remain so in the near future. With the help of the C3 AI suite, this cloud-based enterprise SaaS play enables its users to quickly transform their applications into more intelligent ones. The company’s main sources of revenue are subscription services and professional fees, but because it has been investing heavily in growth, its SG&A costs, which include marketing expenses, have been equal to its revenues for the past six quarters.

Large corporations like LyondellBasell (LYB), Raytheon (RTX), Shell (SHEL), and the U.S. Air Force are just a few examples of its primary clients. Now that AI has gained attention thanks to ChatGPT, it’s likely that smaller businesses will express interest in C3 instead of waiting for the sales team to approach them. The company drastically altered its pricing model in December to consumption-based, allowing customers to spend less on Capex, in an effort to attract more customers.

To capitalize on the buzz surrounding ChatGPT, the company has also created the C3 Generative AI Product Suite for Enterprise Search, which is a customized user experience that allows for querying across various corporate information systems using natural language or conversational types of interaction. It’s interesting to note that, in addition to OpenAI’s ChatGPT, C3’s Generative AI also incorporates some Google functionality and other training models, as shown in the illustration below.