What happened

Shares of artificial intelligence (AI) software company C3.ai (AI -0.17%) were on the rise Wednesday, up about 5% as of 2:30 p.m. ET.

There were likely two reasons for today's gains. The most material may be investors buying the recent dip in artificial intelligence stocks ahead of Nvidia's earnings this afternoon. Second, C3.ai was named an artificial intelligence "solution to know" by an independent technology research and advisory firm.

So what

C3.ai's stock has pulled back a lot from recent highs along with several other high-flying tech stocks riding this year's artificial intelligence hype. Of course, before the recent near-40% dip in the stock price, C3.ai's stock had more than tripled on the year.

But rather than seeing a further breakdown, it appears buyers are stepping in at these levels, especially on the cusp of Nvidia's earnings, which are due after the market close today. Last quarter, Nvidia delivered blockbuster guidance for 50% quarter-over-quarter growth, and investors anticipate even more bullish commentary on demand for artificial intelligence solutions on today's call. 

C3.ai, whether justified or not, has been tied to Nvidia's stock this year, as it is seen as an artificial intelligence beneficiary.

While some may find that designation questionable, C3.ai did also earn a commendation from a Silicon Valley research and advisory firm today. Constellation Research, which bills itself as a research firm that also advises companies implementing new "exponential" technologies, came out with its "7 Solutions to Know" report on artificial intelligence and machine learning platforms today.

C3.ai was named as one of those seven platforms, while the other six platforms were all very large and well-known FAANG names and other large-cap enterprise software-as-a-service (SaaS) companies.

Constellation's site says of its criteria, "Seven key components for AI success include the ability to handle large amounts of complex data, deliver massive compute power, compress time, provide math talent, embody domain expertise, leverage human user experience, and support contextual decisions."

Now what

The research report from Constellation lends some credence to C3.ai being a notable player in the current AI software stack. However, C3.ai isn't a cloud platform, so it doesn't deliver the "massive compute power" criteria. Rather, it partners with organizations to make company-specific software applications using a company's own data. And whether it can compete with such large and well-funded competitors remains to be seen. 

The company could very well find success; however, that is yet to be determined by its financials. Whereas other AI-related stocks have seen booming revenue and demand, C3.ai's revenue was only flat year over year last quarter, and the company only guided for 15% or so revenue growth for the next 12 months, along with continued operating losses. That's certainly nothing to sneeze at, but far from the growth seen in other large AI platforms.

Given the rather modest outlook, it appears as though C3.ai's outperformance today and through the year is being driven by factors other than fundamentals. That's why I would tread especially carefully in this name. The year ahead will separate some true AI winners from pretenders. While the Constellation report is encouraging, C3.ai's fundamentals in relation to its valuation at 13 times sales makes me think it may be in the latter category.