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I felt in a playful mood today as I thought about the subject to write about here at Barchart.com. Occasionally, I like to use stock symbols for corporate names as selection criteria for stocks to cover.
As I looked at the top 100 price volume leaders early in Tuesday’s trading -- other than noticing that Tesla (TSLA) had the highest price volume, four times Nvidia’s (NVDA) price volume -- I saw four stocks had AI (artificial intelligence) in their corporate name.
There is no question that AI is one of the hottest trends in technology at the moment. Maybe too hot. However, unlike cannabis, there is almost no chance AI is going away to join the dustbin of fads that have come and gone over the years. AI is here to stay.
The two big questions being asked by investors: Who are the companies that will benefit most from AI over the long haul? And which AI businesses will benefit from the business community’s buy-in?
The answers to both of these questions are potentially years away. Nonetheless, I’ll consider whether any of these four AI names are worth owning.
Bullfrog Ai Holdings
Bullfrog Ai Holdings (BFRG) has a price volume of 106,484, as I write this early in Tuesday trading. Trading under $10, it attracts many retail investors because of its low share price. But, I’ll admit, I know little about this company.
It turns out that the company uses AI to help healthcare businesses develop drugs more precisely. But, of course, it doesn’t hurt that it’s partnered with leading John Hopkins University, a leader in AI technology development.
It’s understandable why Bullfrog Ai flew under my radar. It only went public in February, selling 1.3 million units at $6.50 per unit for gross proceeds of $8.4 million. Each unit included one common share and one tradeable warrant to buy a second share for $7.80 and a non-tradeable warrant to purchase a third share for $8.125.
With BFRG up 77% on the day and seemingly unstoppable, many warrants are likely being exercised as I write this.
As I scan Bullfrog Ai’s press releases, I see its April 4 press release announcing that John Hopkins’ Applied Physics Laboratory (APL) has awarded a worldwide license to Bullfrog to use its patented technology with its bfLEAP platform.
“The ability to make predictions with incomplete multimodal data and insufficient scalability of digital analytics are two critical issues for researchers and clinicians today,” said Vin Singh, Founder and CEO of BullFrog AI. “With the help of John Hopkins APL’s patented technology, our bfLEAP™ platform is able to overcome these challenges, enabling precise identification of meaningful data for more agile drug development.”
Bullfrog Ai’s bfLEAP AI platform was created from technology initially developed by John Hopkins’ APL. So it’s only logical that the two organizations would extend their partnership.
While there is a lot of potential for BFRG to contribute to drug development significantly, it generated no revenue for the nine months ended Sept. 30, 2022, and a loss of $2.1 million.
C3.ai
Of the four names, C3.ai (AI) is the largest company, with a market cap of $3.1 billion. It’s also the one I’m most familiar with. The enterprise AI application software company was recently recognized by the Financial Times as one of its 2023 list of fastest-growing companies.
The company’s C3 AI platform Is an end-to-end platform for developing, deploying, and operating Enterprise AI applications. The company’s goal is to become the worldwide leader in Enterprise AI.
Tom Siebel founded the company in January 2009. Before that, Siebel founded and led Siebel Systems, a customer relationship management software company, from its founding in 1993, until its sale to Oracle (ORCL) for nearly $6 billion in January 2006.
C3.ai’s stock has decreased considerably from its December 2020 high above $160. However, some time’s, a company’s potential gets ahead of itself. Up 143% year-to-date, its share price is far more realistic at this stage of the company’s development.
As for revenues and profits, through the first nine months of fiscal 2023 (April year-end), they were $194.4 million (up 8% year-over-year) and -$203.9 million, respectively.
As a result of the significant losses, analysts are very lukewarm about its stock. Of the 11 covering it, they rate it a Hold (3.0 out of 5.0) with a mean target of $19.55, well below where it’s currently trading.
Guardforce Ai
Guardforce Ai (GFAI) is another small AI-related firm with a market cap of just $21 million. Guardforce went public in 2021 at $4.15 a share, raising $15 million for its future growth.
Although the company’s history dates back to 1982, it was only in 2020 that things got rolling in AI-related business. That’s when it launched the T1 Robot as part of its Robotics-as-a-Service (RaaS) business and robotics AI solutions.
The company estimates that the global RaaS market will be worth an estimated $200 billion by 2026. Guardforce currently has 6,000 robots in active use by companies, primarily in Asia. The robots are automated kiosks at restaurants, hospitals, and hotels. Other uses include mist disinfection in hospitals, concierge services in malls, indoor office delivery, etc.
For the six months ended June 2022, Guardforce had revenue of $16.9 million, down from $18.4 million a year earlier. However, on the bottom line, it lost $6.3 million, up considerably from a $1.6 million loss a year earlier.
While it is making some acquisitions of robot-related companies, GFAI is not a sure thing.
Bigbear.ai Holdings
Bigbear.ai Holdings (BBAI) is the second largest of the four stocks with a $352 million market cap. The company’s AI-powered intelligence solutions are used by businesses looking for answers for supply chain and logistics, cybersecurity, and autonomous systems.
An example of what it does is illustrated in a company blog post from January about the US Navy's work on building a fully autonomous fleet of driverless vessels to patrol open waterways and predict future threats.
“In September 2021, the U.S. Navy established Task Force 59 to explore ways to strategically infuse emerging technologies, such as AI/ML, to deliver the world’s first unmanned surface fleet. With the ultimate goal of providing ‘deterrence by detection,’ sailors will be armed with more reliable and actionable intelligence than ever,” stated Ian Newell, BigBear.ai’s Senior Product Manager for Ursa Minor, the company’s situational awareness and predictive forecasting analytics product.
Compared to the robots used by Guardforce mentioned above, the work by BigBear.ai seems more directly related to AI/ML.
However, like the other three AI businesses, BigBear.ai currently loses money.
In 2022, it lost $121.7 million from $155.0 million in revenue. That's 79 cents in 2022 losses for every dollar of sales. In 2021, it lost 85 cents per dollar of sales. If you exclude the Q2 2022 and Q4 2022 goodwill impairment charges of $35.3 million and $18.3 million, the company lost $71.5 million, or 46 cents a share per dollar of sales, nearly half the amount a year earlier.
The Verdict
The troubling aspect of all four companies is that none have growth that demands your attention. So you would think AI would guarantee better rates of growth. Realistically, however, it is probably the best indication that AI’s best days are still ahead.
Regarding brass taxes, C3.ai has two things going for it: First, it has a tech legend running its business in Tom Siebel. Second, it had net cash of $767 million at the end of Q3 2023, compared to net debt of $171 million for BigBear.ai.
C3.ai can tolerate future losses far more than BigBear.ai can. For this reason, if I had to pick one of the four stocks, I would choose C3.ai.
On the date of publication, Will Ashworth did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
