While mega-tech titans dominate headlines in the rapidly evolving landscape of artificial intelligence (AI), the next generation of innovation may lie in the hands of more specialized players. C3.ai (AI 0.09%) and BigBear.ai (BBAI -4.19%) are two small caps leveraging AI-powered applications into significant long-term growth opportunities.
C3.ai is capturing strong demand for commercial AI solutions with tools to improve productivity and operational efficiency. BigBear.ai has carved out a niche supporting mission-critical intelligence for the defense sector while moving forward with a unique focus on vision-enabled AI.
With both companies projecting a positive outlook, let's discuss whether C3.ai or BigBear.ai is the better AI stock right now.
Image source: Getty images.
The case for C3.ai
C3.ai has rapidly emerged as a leader in enterprise AI with its comprehensive suite of integrated software solutions. The company's C3 AI platform serves as a foundational starting point for organizations to develop, deploy, and operate custom AI-powered applications. C3.ai also offers ready-to-use AI programs, including generative AI capabilities, tailored to needs across multiple sectors.
The strategy appears to be resonating in the market, with the company counting an extensive list of major corporations as current customers. In the company's most recently reported fiscal second quarter (for the period ended Oct. 31), revenue climbed by 29% year over year, accelerating from a 17% pace in the prior-year quarter.
Perhaps C3.ai's biggest win this year was the announcement of a landmark strategic alliance with Microsoft to feature its portfolio of products on the Azure cloud ecosystem as a preferred vendor. Management believes the deal marks an inflection point for the company's growth runway.
For the full year, C3.ai is targeting revenue growth of 22% to 28%. While the company is not yet profitable, the net loss continues to narrow, with fundamentals supported by a net cash balance sheet position.
Ultimately, what makes C3.ai a great artificial intelligence stock is its profile as a proven innovator, combined with impressive operating momentum. Investors confident in the company's ability to execute its growth strategy have plenty of reasons to buy and hold the stock.
The case for BigBear.ai
With a market capitalization of approximately $1.2 billion, BigBear.ai is smaller than C3.ai's $4.1 billion valuation, generating slightly less than half of C3.ai's revenue during its most recent quarter. The two companies share similarities, as BigBear.ai offers several enterprise-scale AI and machine learning solutions in data analytics to help organizations make informed decisions.
In the company's third quarter, revenue increased by a solid 21% year over year, driven by high-profile contracts with the U.S. Department of Defense for its ConductorOS platform.
Where BigBear.ai stands out is through its computer-vision technology, which serves as a bridge connecting real-time images with actionable AI-powered insights. Several airports worldwide have already adopted BigBear.ai's solutions, implementing products like "TrueFace" and "veriScan" in their security screening processes.
The vision-AI platform has the potential to transform various industries, with applications spanning medical diagnosis, agricultural surveillance, industrial inventory management, and manufacturing quality control. This exposure to a differentiated category within AI strengthens the case for why BigBear.ai is a compelling stock to own.
In contrast to C3.ai, BigBear.ai's current growth rate is a bit lower, and the company carries more debt on its balance sheet. Nevertheless, it has demonstrated progress in controlling costs to minimize its financial loss. With BigBear.ai trading at a forward price-to-sales (P/S) ratio of less than 6 based on projected full-year revenue, shares of the company are at a deep discount to C3.ai stock, which commands a forward sales multiple of 11. By this measure, BigBear.ai appears to offer better value.
BBAI Operating Revenue (Quarterly YoY Growth) data by YCharts
Decision time
There's a lot to like about both C3.ai and BigBear.ai, which may both be in the early stages of transformational growth. If forced to choose just one as the better buy today, I believe BigBear.ai shares may have more upside potential in 2025, based on a more attractive valuation heading into a critical year for the company to demonstrate its commercial potential. For investors with a long-term time horizon, BigBear.ai stock could complement a diversified portfolio.
