The artificial intelligence (AI) market is often associated with intelligent robots taking over human tasks. But most of those robots aren't the shiny androids we see in sci-fi movies -- they're simply bits of code that are integrated into software to streamline difficult and time-consuming tasks.

SentinelOne (S 0.44%) and C3.ai (AI 1.55%) both tap AI algorithms for those purposes. SentinelOne is a cybersecurity company that uses its AI-powered Singularity XDR (extended detection and response) platform to process potential threats instead of relying on teams of human analysts. C3.ai develops AI algorithms that can be plugged into an organization's existing software infrastructure to optimize its operations.

A row of robots working on laptops.

Image source: Getty Images.

SentinelOne went public last June at $35 per share and its stock hit an all-time high of $78.53 five months later, but subsequently plunged back to the high $30s. C3.ai went public at $42 per share in December 2020 and hit its all-time high of $177.47 that same month, but now trades at about $20 per share.

Both stocks crashed for similar reasons: Their initial valuations were too high and investors fretted over their slowing growth and red ink. Rising interest rates exacerbated that pressure as investors rotated from growth to value stocks. But is either beaten-down AI stock worth buying right now?

SentinelOne: Stunning growth and steep losses

SentinelOne challenges both on-premise and cloud-native cybersecurity companies with a hybrid model that straddles both markets. It claims on-premise solutions are too difficult to scale, and that cloud-only solutions like CrowdStrike are too dependent on active internet connections and human analysts. To address those shortcomings, its Singularity platform evaluates data from both types of platforms with AI algorithms.

SentinelOne's approach is catching on. Its revenue doubled to $93.1 million in fiscal 2021 (which ended in January of the calendar year), then jumped 120% to $204.8 million in fiscal 2022. Its total number of customers grew more than 70% to about 6,700 for the full year, and 520 of those customers generated annual recurring revenue (ARR) of more than $100,000. It ended the year with an impressive dollar-based net revenue retention rate of 129%, and it expects its revenue to grow another 79%-81% this year.

But on a generally accepted accounting basis (GAAP), SentinelOne's net loss widened from $117.6 million to $271.1 million in fiscal 2022. Its non-GAAP net loss also widened from $101.7 million to $178.5 million. Analysts expect it to stay unprofitable for the foreseeable future.

SentinelOne's stock also remains richly valued at 27 times this year's sales. That red ink and high valuation made SentinelOne a tough stock to hold as macroeconomic headwinds shook investors out of growth stocks.

C3.ai: Stabilizing growth with customer concentration issues

C3.ai's algorithms help large enterprise and government customers streamline their operations, improve employee safety, and detect fraud. It mainly serves the energy, industrial, and government sectors.

Its revenue jumped 71% to $156.7 million in fiscal 2020 (which ended in April of the calendar year), but rose a mere 17% to $183.2 million in fiscal 2021 as the pandemic disrupted the energy and industrial markets.

But for fiscal 2022, it expects its revenue to rise 38% to about $252 million. Analysts anticipate another 33% growth in fiscal 2023.

That outlook is encouraging, but C3.ai still relied on a joint venture with a single customer -- the energy giant Baker Hughes (BKR -0.05%) -- for a whopping 39% of its revenue in the first nine months of fiscal 2022. It also only served 50 "customer entities" (large organizations) at the end of the third quarter, compared to 53 in the second quarter. That customer concentration and peaking customer growth raise bright red flags.

C3.ai is also drowning in red ink. Its GAAP net loss narrowed from $69.4 million to $55.7 million in fiscal 2021, but it widened to $133.6 million in the first nine months of fiscal 2022 as it ramped up its investments and tried to court new customers. On a non-GAAP basis, its net loss also widened from $17.4 million to $54 million in the first nine months of the year.

C3.ai's stock might look reasonably valued at eight times this year's sales, but it probably won't command a higher valuation until it resolves its customer concentration issues and stabilizes its losses.

The better buy: SentinelOne

I wouldn't rush to buy either of these stocks in this challenging market. But if I had to choose one as a turnaround play, I'd pick SentinelOne -- it's growing faster, it's not struggling with any customer concentration issues, and it's carving out a disruptive niche in the booming cybersecurity market.