What happened
Shares of C3.ai (AI -1.73%), the eponymous AI stock, tumbled 8.5% through 11:25 a.m. ET this morning, erasing all its gains from earlier in the month of February and returning it to January levels.
Congress is probably the reason.
So what
So what's ailing C3.ai stock today -- aside from the fact that the profitless AI app developer has turned itself into a momentum stock that can easily rise or fall on no news at all? Here's a theory: Earlier this morning, Reuters reported that lawmakers have begun to "take an interest" in regulating artificial intelligence stocks because of the rising interest in, and worries over, ChatGPT.
Mind you, C3.ai is not OpenAI (ChatGPT's creator), and vice versa. In fact, the two companies have entirely different business models. But ChatGPT's growth to more than 100 million monthly users in record time -- it's literally the "fastest-growing consumer application in history," says Reuters -- has Congress worrying about an array of issues, from privacy to discrimination to disinformation from "malicious actors." At the local level, meanwhile, school districts in various locations have begun establishing rules against the use of chatbots such as ChatGPT to prevent plagiarism and cheating.
And now, legislators are starting to consider whether they should get ahead of these issues and pass some laws to regulate AI companies and their activities.
Now what
What might that mean for C3.ai?
I asked ChatGPT for its opinion, and while the chatbot initially demurred that "there is no single answer to how Congress might regulate AI companies such as C3.ai," if Congress did decide to regulate, such regulations might "impose additional costs on C3.ai for data privacy and security [for example, and] these costs could be passed on to consumers, reducing demand for the company's products and services."
That's the bad news. The good news is that the right kinds of regulation could also give users of AI products such as C3.ai's increased confidence in the reliability of the data churned out by AI apps, increasing demand for their services -- and logically, therefore, increasing revenues and profits as well.
Long story short, while it's probably prudent to anticipate regulation of ChatGPT, C3.ai, and other artificial intelligence companies, that's not necessarily a reason to sell the stock before you see what form such regulation will take -- or its effects on the business. Instead, focus on what we already know: Sales growth slowed to just 7% last quarter, sales are expected to decline this quarter, and analysts see C3.ai losing money as far out as the eye can see.
To my mind, those are all much better reasons to sell C3.ai today than anything Congress might do tomorrow.
