Shares of artificial intelligence (AI) software company C3.ai (NYSE:AI) fell 12.7% in the morning session after KeyBanc analyst Eric Heath downgraded the stock to Sell from Hold and set a $29 price target had established. The price target implied a potential 25% downward pressure from the stock’s price before the cut was announced. The analyst thinks the stock’s recent rally means AI’s valuation carries “unfavorable risk/reward.”
Shares ended the day at $35.44, down 10.7% from the previous close.
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C3.ai stock is extremely volatile, having seen 35 moves of more than 5% in the past year. But such big moves are rare even for C3.ai and indicate that this news has significantly affected the market’s perception of the company.
The previous big move we wrote about was three days ago, when shares rose 7.1% as stocks rose, led by the Nasdaq, which climbed 1.2%, while the S&P 500 also rose 0.5% amid of continued positive momentum. Investors are bracing for the outcome of the Fed’s policy meeting later this week, with general sentiment indicating that markets are not expecting any major surprises.
The consensus was that the Fed would cut rates by 0.25% at the last committee meeting of the year. Recent economic data, including the November 2024 CPI report, continues to support the soft landing narrative, suggesting the Fed can keep inflation in check without hurting the economy.
C3.ai is up 23.6% year-to-date, but at $35.52 per share it is still trading 17.3% below its 52-week high of $42.94 set in December 2024. Investors looking for Bought $1,000 worth of C3.ai shares on the stock exchange. The IPO in December 2020 would now be considered an investment worth $384.04.
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