Companies are racing to find ways they can integrate artificial intelligence (AI) into their products, services, and general operations right now, because it's becoming clear the technology is capable of boosting productivity and reshaping customer experiences.

Tools like OpenAI's online chatbot ChatGPT are capable of holding deep conversations with users on complex topics, and they can even write computer code to supercharge the development of software applications. 

AI could reach $200 trillion in market value

Ark Investment Management, run by famed technology investor Cathie Wood, is one of the most bullish firms on Wall Street when it comes to AI. It released its "Big Ideas 2023" report in January, which contained a series of projections for the technology's impact on businesses, workers, and the broader economy.

Ark thinks generative AI tools like ChatGPT could result in a four-fold increase in the productivity of knowledge workers by 2030, from lawyers to scientists to software engineers. Ark says knowledge workers around the world currently earn $32 trillion per year in salaries, but if companies invest $41 trillion in AI, the productivity gains could add a whopping $200 trillion to global labor productivity.

The firm predicts the cost to train large language models like ChatGPT will decline by 70% per year between now and the end of the decade, so AI will quickly become more accessible to businesses of all sizes.

A company called C3.ai (AI -1.34%) might be one of the biggest winners if Ark's predictions come to pass. It's helping hundreds of businesses access AI, and with its valuation of under $4 billion right now, it looks ripe for investment.

C3.ai offers over 40 plug-and-play applications

Not every company has the resources to build AI applications from scratch, which is why platforms like ChatGPT are so popular with businesses. But C3.ai offers a portfolio of more than 40 applications serving at least 14 different industries, from manufacturing to financial services to energy. Each one has a specific use case, and C3.ai can provide customizations to suit each customer's requirements.

For example, the C3.ai Anti-Money Laundering platform uses machine learning to detect suspicious financial activity, and its Reliability application is an asset management tool that helps companies conduct predictive maintenance on their equipment. The latter is popular with oil and gas companies because failures can result in both financial and environmental catastrophes.

The energy sector is C3.ai's largest source of revenue, accounting for about 34% of bookings during fiscal 2023 (ended April 30). Oil and gas giant Shell (NYSE: SHEL) has deployed 100 applications monitoring thousands of items of equipment to optimize performance. At one liquefied natural gas facility alone, C3.ai has helped Shell reduce carbon emissions by an amount equivalent to taking 28,000 vehicles off U.S. roads each year.

Overall, C3.ai had 287 customer engagements at the end of fiscal 2023, up 35% compared to 2022. That could be setting up for significant growth thanks to the recent launch of the new C3 Generative AI solution, which is designed to compete with platforms like ChatGPT

The company says it's a superior product because it can ingest data in multiple formats -- whether it's in Adobe PDF or Microsoft Excel, for example. Plus, it provides consistent answers, it's secure, and it's supposedly hallucination-free (in other words, it doesn't provide pie-in-the-sky, ridiculous answers to prompts).

Revenue growth has slowed but is set to improve

C3.ai is in the middle of an important transition away from subscription-based pricing for its applications. Negotiating those deals can be time-consuming because each customer has unique requirements, which makes pricing very difficult to nail down. As a result, it's shifting to a consumption-based model, where any customer can come aboard any time and simply pay for what they use.

During fiscal 2023, the company warned investors this would lead to a temporary slowdown in its revenue growth because it would take time for customers to scale up their usage. As a result, C3.ai's revenue increased by just 5% for the year to $266.8 million. But it's predicting as much as 20% growth in fiscal 2024 as it expects the consumption model to have gathered steam.

Based on the below graphic, the company is currently in phase 1 and will move into phase 2 during fiscal 2024. But investors who hold C3.ai stock for the long term could reap the greatest rewards, because the company's revenue growth should really ramp up from fiscal 2025 onward.

A graph comparing C3.ai's subscription revenue model with its new consumption model.

Data source: C3.ai.

But there are risks to C3.ai's business in the short-term. It continues to lose a significant amount of money; its net loss totaled $268.8 million in fiscal 2023, which was a 40% increase compared to 2022. That was mostly attributable to a 40% year-over-year increase in research and development costs, which were necessary in order for the company to launch new products like C3 Generative AI.

C3.ai has over $730 million in cash, equivalents, and short-term investments on its balance sheet, so it can afford to run at a similar loss rate for a couple more years. But investors should be wary -- it will need a cash infusion after that if it can't achieve profitability.

C3.ai stock could soar in the coming years

C3.ai stock trades 78% below its all-time high set shortly after it went public in 2020. There was a limited understanding of AI and its potential use cases back then, and the company wasn't generating as much growth as investors wanted to see. But with the enthusiasm for AI in 2023 C3.ai stock has soared 213% year to date, so it's on the path to recovery.

Aside from what Ark Invest predicts, C3.ai believes the opportunity for its applications specifically will top $791 billion by 2026 -- so given its annual revenue right now, it hasn't even scratched the surface yet.

In the long run, having such a broad portfolio of AI applications could differentiate C3.ai from other players in the industry, helping it capture more market share and ultimately boost revenue growth. Plus, the company is selling its applications jointly with giant cloud computing platforms like Amazon Web Services and Microsoft Azure, and that partner network could be pivotal for C3.ai's market penetration.

Given C3.ai is valued at under $4 billion right now with potentially trillions of dollars in AI investment to come from the corporate sector, investors could do well to buy its stock now and hold on for the long-term.