What happened
Shares of C3.ai (AI -0.85%) were moving higher Thursday in line with a broader upswing among tech stocks after the Federal Reserve indicated that it was almost done raising interest rates in its rate announcement Wednesday.
While there was no company-specific news about C3.ai Thursday, the Fed's commentary and some other macro-level news were enough to send its stock soaring. As of 12:41 p.m. ET, the stock was up 12.3%, while the Nasdaq had gained 1.9%.
So what
The stock market actually fell sharply at the end of Wednesday's trading session as comments from Treasury Secretary Janet Yellen about not issuing blanket insurance for bank depositors overshadowed the Fed's rate hike announcement.
While the central bank raised the federal funds rate by 25 basis points (0.25 percentage points) to a range of 4.75% to 5%, comments from Fed Chair Jerome Powell and the bankers' "dot plot" showed that they only expect to make one more 25-basis-point interest rate hike for the rest of the year, forecasting that 2023 will end with a federal funds rate between 5% and 5.25%.
That's good news for unprofitable high-growth stocks like C3.ai as they tend to be more sensitive to higher interest rates. Higher rates make companies' future earnings less valuable since they raise the discount rate -- the interest rate used to calculate the present value of expected future cash flows.
C3.ai stock has been especially volatile this year due to the high level of hype around artificial intelligence after the public release of ChatGPT, and investors may see more upside in the stock now that they believe the rate-hiking cycle is almost over.
Now what
C3.ai is scheduled to release its new C3 Generative AI Product Suite this month, starting with enterprise search, which will allow companies to search for data across all of their information systems.
If that new product gains traction and the macroeconomic environment remains friendly, this AI stock could have a lot of upside potential.
