What happened

Shareholders of artificial intelligence stock C3.ai (AI -0.85%) awoke to a rude surprise this morning as news of a "short" report drove the stock down 4.6% through 9:45 a.m. ET. But there's good news for C3.ai investors as well.

As quickly as C3 fell out of bed this morning, it picked itself right back up and headed higher. As of 10:45 a.m., the stock has recovered all of its losses -- and is even up 4.8%!

So what

So what exactly is causing all the commotion at C3.ai this morning? Well, it goes like this. In a report broadcast on Twitter today, hedge fund and famed short-seller Kerrisdale accused C3.ai of being a "no-growth, cash-burning industry flop" -- and, as if that weren't enough, Kerrisdale then proceeded to elaborate:

Nobody likes C3.ai, says Kerrisdale, because its products are expensive and difficult to use, resulting in shrinking sales and declining revenue and profits. The company does have one key customer, oil-field services company Baker Hughes, but even there the partnership is "falling apart," and Baker is buying less from C3.ai and selling its own shares of the tech company.

All of which sounds pretty scary and explains why C3.ai stock plummeted earlier this morning.

Now what

But why did it bounce back?

Well, not to put too fine a point on it, but...did you see the Q3 earnings report C3.ai revealed just three days ago? Viewed from one perspective, that report seemed to confirm everything Kerrisdale has accused C3 of. Sales declined more than 4% to $66.7 million, and C3 took a loss of $0.57 per share per generally accepted accounting principles (GAAP).

Viewed from another perspective, however, C3 beat Wall Street predictions for both sales and earnings, and the size of the earnings beat was pretty substantial -- a non-GAAP (adjusted) loss of only $0.06 per share versus the $0.22 disaster that analysts had predicted. Plus C3 went on to promise investors more beats to come, predicting sales will beat predictions for $69.9 million in fiscal Q4 (that's the quarter we're in now, by the way), and C3 also said it will deliver sales of between $264 million and $266 million for the year.

Granted, even if C3 does hit that full-year target, it will work out to  only about 5% sales growth year over year -- which hardly seems like something for a growth stock in the red-hot AI industry to brag about. It does, however, suggest that Kerrisdale may be jumping the gun in writing off C3 as a stock failure before it's had a chance to prove itself.