C3.ai (AI -3.57%) took investors on a wild ride after its IPO in December 2020. The enterprise AI software company went public at $42 per share, more than quadrupled to its all-time high of $177.47 in the same month, but now trades at around $17.

The bulls were initially impressed by C3.ai's rapid revenue growth, catchy ticker symbol, and exposure to the expanding AI market. But C3.ai only expects its revenue to rise 4%-5% in fiscal 2023 (which ended last month), compared to its 38% growth in fiscal 2022, and it should remain deeply unprofitable for the foreseeable future.

The back of an android's head shatters.

Image source: Getty Images.

C3.ai also still generates about 30% of its revenue from a joint venture with the energy giant Baker Hughes, and there's no guarantee that shaky partnership will be renewed when it expires in fiscal 2025. C3.ai's decision to pivot from a subscription-based model to a usage-based one last year also suggests it's starved for growth in this tough macro environment, and its stock still isn't cheap at 7 times this year's sales.

C3.ai's stock bounced back from its all-time lows earlier this year amid the buying frenzy in AI-related stocks, but I still don't believe it's a compelling long-term play on that growing market. Instead of taking a big risk on C3.ai, investors interested in AI investing who missed out on its post-IPO pop should simply stick with a more reliable blue chip stalwart: Microsoft (MSFT 0.12%).

Why is Microsoft a better AI stock than C3.ai?

C3.ai's AI algorithms can be plugged into an organization's existing software infrastructure to automate certain tasks, optimize spending, improve employee safety, and detect fraudulent transactions. It also provides those plug-ins as stand-alone services. That represents a shrewd way to gradually creep into the AI market, but Microsoft can simply integrate more of its own AI services with its widely used Windows, Office, Dynamics, and Azure ecosystems.

Windows and Office still lead the desktop OS and productivity software markets, respectively. Dynamics ranks second in the customer relationship management (CRM) software market after Salesforce, according to IDC, while Canalys ranks Azure as the world's second-largest cloud infrastructure platform after Amazon Web Services (AWS). Microsoft's Bing is a distant underdog in the search engine market, but StatCounter claims it still holds 3% of that global market.

Under CEO Satya Nadella, who took the helm in 2014, Microsoft prioritized the transformation of its desktop-based software into cloud-based services. As a result, its cloud revenue rose at a compound annual growth rate (CAGR) of 46% from $4.4 billion in fiscal 2014 (which ended in June 2014) to $91.2 billion in fiscal 2022. Its total revenue grew at a CAGR of 11%.

Nadella's next step is to optimize that cloud-based ecosystem with a wide range of AI services. That's why Microsoft acquired the speech recognition technology company Nuance last year, and why it invested billions of dollars into ChatGPT's developer OpenAI. Microsoft has already integrated OpenAI's "generative AI" technologies into its Bing search engine (through Bing Chat), and it plans to expand those AI features into Azure, Windows, Office, and Dynamics.

That expansion could widen Microsoft's moat against Alphabet's Google, Salesforce, and other tech giants. It could also easily render smaller AI players like C3.ai obsolete with its integrated first-party services.

An evergreen business model with reliable returns

Unlike C3.ai, Microsoft doesn't have any customer concentration or profitability issues. Microsoft is also still growing at a faster rate despite being on track to generate about 800 times as much revenue as C3.ai in its current fiscal year.

Microsoft's cloud business faces some near-term macro headwinds and its planned takeover of Activision Blizzard might be in trouble, but analysts still expect both its revenue and earnings per share to rise at a CAGR of 10% between fiscal 2022 and fiscal 2025. Those rock-solid growth rates, along with its reasonable forward price-to-earnings ratio of 25, make Microsoft one of safest blue chip tech stocks to buy right now -- as well as a great long-term play on the booming AI market.