AI stocks surge as investors bet on growth prospects

(Reuters) -Shares of artificial intelligence-based (AI) product makers zoomed on Friday, as a strong forecast from retail darling C3.ai Inc amplified an ongoing euphoria in the segment driven by the launch of OpenAI’s ChatGPT.

C3.a1 forecast better-than-expected revenue and profit for both the fourth quarter and fiscal year 2023, after its third-quarter results topped Wall Street estimates.

Shares of the AI software provider were up 16% at $24.80, and were one of the top five trending stocks on StockTwits. If the gains hold, the stock is set to notch its strongest one-day gain in a month.

“The company is starting to gain momentum in building significant enterprise opportunities in its pipeline with its suite of innovative enterprise AI solutions,” said Wedbush analyst Daniel Ives.

The firm’s aim to turn cash positive and adjusted profitable by the end of fiscal year 2024 also boosted the stock, but Ives believes the execution of these ambitions is key to regain the Street’s confidence heading into 2023.

Retail investors have flocked to small-cap firms building AI tools as companies such as Google-parent Alphabet (NASDAQ:) Inc and Microsoft Corp (NASDAQ:) have locked horns to make AI the next big growth driver.

Microsoft’s investment in OpenAI’s ChatGPT boosted AI firms’ popularity further. Chatbots like the ChatGPT are software applications that aim to mimic human conversation using artificial intelligence.

Other major AI stocks also surged on Friday with BigBear.ai, conversation intelligence firm SoundHound AI, and Thailand’s security firm Guardforce AI jumping between 5% and 20%.

So far this year, these stocks, including C3.ai, have surged 33.9%-321.6%, as of the previous day’s close.

“AI could become the new gold rush on Wall Street,” said Adam Sarhan, chief executive officer of 50 Park Investments in Florida.

“But it still needs some more time to mature a bit, better price action, and prove that it can generate profits for investors.”