Growth stocks have taken a hit in the market so far this year as investors have entered risk-off mode, thanks to the economic uncertainty caused by the ongoing tariff-fueled trade war. However, the good part is that the stock market sell-off has brought the valuations of some fast-growing companies down to attractive levels.
C3.ai(NYSE: AI), for instance, has witnessed a substantial pullback of 44% in its stock price this year and is now trading at just under $20. The enterprise artificial intelligence (AI) software provider trades at a substantial discount when compared to where it was at the end of 2024. At the same time, C3.ai has been growing at a nice clip, adding new customers and landing bigger deals with existing ones.
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The company is in a solid position to make the most of the enterprise AI software market in the long run. This is why someone looking to put $20 into a growth stock right now should definitely consider taking a closer look at C3.ai.
Below, I'll show you why a $20 investment in C3.ai could turn out to be a smart long-term move.
C3.ai's accelerating growth is here to stay
The demand for enterprise AI software is picking up, which explains why C3.ai's growth rate has been improving, as well. In the third quarter of fiscal 2025 (which ended on Jan. 31), the company reported a 26% year-over-year jump in revenue to $99 million. That was higher than the 18% revenue growth it reported in the prior-year period.
C3.ai's enterprise AI applications serve multiple verticals, such as customer relationship management (CRM), financial services, defense and intelligence, and supply-chain management, among others. It also offers an agentic AI platform in which customers can build, deploy, and operate AI agents. These offerings are now being used by multiple businesses and government organizations.
In its February earnings release, C3.ai management pointed out that its AI software tools are being deployed by the likes of Sanofi, ExxonMobil, Nucor, the U.S. Department of Defense, the U.S. Air Force, and multiple state government agencies. Importantly, C3.ai's customer list is likely to get longer as the company has been signing more agreements and conducting pilot projects with potential clients.
C3.ai closed 66 agreements in fiscal Q3, an increase of 72% from the year-ago period. These included 50 pilot projects with customers of various sizes. An important thing to note is that C3.ai has adopted a smart strategy of partnering with major cloud service providers, such as Amazon, Microsoft, and Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) Google, to offer its AI software tools on their platforms.
C3.ai has been focused on strengthening its partnerships with these cloud giants, and that move is reaping rich rewards for the company. For example, C3.ai is now offering its entire suite of enterprise AI application software on Microsoft's commercial cloud platform after the two companies bolstered their partnership last year.
The expanded agreement led to a 460% increase in the agreements closed by C3.ai on Microsoft's cloud platform. Even better, C3.ai is offering its AI solutions through Microsoft's global sales infrastructure, and this move has allowed it to enhance its qualified sales pipeline by a whopping 244% from the year-ago period.
C3.ai believes that it can jointly pursue 621 new customer accounts with Microsoft, which could help the company grab a bigger share of the generative AI software market in the future. As a result, there's a good chance that the company's growth could turn out to be better than Wall Street is expecting.
The chart above tells us that C3.ai's revenue could grow 20% in fiscal 2026 and 18% in fiscal 2027. That's lower than the 25% growth that the company is expected to deliver in the current fiscal year. However, the expanding sales pipeline, the lucrative addressable opportunity in AI software, and a smart go-to-market strategy of offering its tools through popular cloud service providers could help it exceed consensus expectations in the future.
A solid balance sheet and valuation make the stock worth buying
C3.ai is now trading at just 6.7 times sales, which is significantly lower than its price-to-sales ratio of 11.2 at the end of 2024. The stock's sales multiple is almost in line with the U.S. technology sector's price-to-sales ratio, which makes it worth buying considering the potential growth on offer.
Additionally, C3.ai has a solid balance sheet with just $4.5 million in debt and $724 million in cash. This puts the company in a nice position to aggressively invest in product development and sales and marketing to make the most of the end-market opportunity on offer. Moreover, C3.ai's cash position should give it the ability to make acquisitions to strengthen its presence in the AI software market.
All this makes C3.ai an attractive AI stock to buy with $20 right now, especially considering that its one-year price target of $29 points toward potential gains of over 50% from current levels, a target it may be able to achieve as the discussion above indicates.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
