Artificial intelligence (AI) presents significant growth opportunities for investors, poised to revolutionize industries by enhancing operational efficiency and automating routine tasks. However, selecting the right AI stock remains a key challenge. This article compares two popular choices for retail investors: C3.ai (AI) and BigBear.ai (BBAI). Both stocks carry inherent risks and potential rewards, and the question remains: which offers a better growth business?
Both C3.ai and BigBear.ai provide AI-powered solutions, yet the distinction lies in their underlying business models and financial health. A critical factor for investors is assessing growth metrics, particularly when companies aren’t yet profitable. Examining operating cash flow reveals a company’s ability to manage its finances and sustain growth.
Over the past three years, C3.ai has demonstrated more consistent and accelerating growth, reflecting the broader AI market’s expansion. This indicates a positive trajectory, driven by the increasing adoption of AI technologies. Conversely, BigBear.ai experienced greater volatility in its growth rate. While management highlights a substantial backlog, it’s crucial to recognize that not all backlog translates into immediate revenue. A significant portion of BigBear’s backlog consists of unexercised options, which doesn’t guarantee immediate sales. Investors must carefully scrutinize these factors when evaluating potential revenue streams.
Comparing cash flow positions is paramount. Operating cash flow – the cash a company generates from its core operations – is a key indicator of financial stability. For unprofitable companies like C3.ai and BigBear.ai, understanding cash burn rate (the rate at which a company spends cash) and cash balances is critical. C3.ai has made strides in reducing its cash burn rate, but it remains higher than BigBear’s. However, C3.ai’s stronger cash position provides a buffer, potentially extending its ability to sustain its current burn rate without immediate fundraising. As of the end of March, BigBear.ai held $107.6 million in cash and cash equivalents, suggesting a runway of multiple years at its current burn rate. C3.ai’s cash and cash equivalents, as of the end of April, totaled $164.4 million, bolstered by $578.3 million in marketable securities, resulting in $742.7 million in near-term liquidity. Despite a slightly higher cash burn rate, C3.ai’s robust cash balance provides greater financial flexibility.
Ultimately, the available data strongly suggests that C3.ai represents the safer and more promising investment of the two. Its superior growth rate and stronger cash position provide a more stable foundation for future expansion. While C3.ai remains unprofitable and continues to burn cash, its financial strength offers a significant advantage. It’s important to acknowledge that the burn rate could intensify, and C3.ai might still require capital raises, but the current numbers paint a picture of a company in a more secure financial position than BigBear.ai. Therefore, based on these metrics, C3.ai appears to be the better buy today. Investors should continue to monitor both companies’ performance and adjust their strategies accordingly.
