AI stocks tumble after short-seller attack on C3.ai

Guardforce AI

05/04/2023 14:53

April 5 (Reuters) - Artificial intelligence (AI) stocks fell on Wednesday after a short
seller alleged accounting issues at retail darling C3.ai Inc  AI.N , dampening investor interest
in the group of small companies that have wildly outperformed the market this year.
    C3.ai was down more than 2% in early trading, while Thai security firm Guardforce AI
 GFAI.O  fell more than 3%, data analytics firm BigBear.ai  BBAI.N  lost 7% and conversation
intelligence company SoundHound AI  SOUN.O  declined slightly.
    C3.ai shed a quarter of its value on Tuesday, reducing its market valuation to $2.80
billion, after Kerrisdale Capital said the firm has "serious accounting and disclosure issues"
in a letter to its auditor Deloitte & Touche LLP.
    Kerrisdale had disclosed its short position in C3.ai last month and accused the company of
"poor customer traction, failing sales partnerships and financial pressures." 
    "There is no evidence of any real wrongdoing or fraud in the short-seller report, but it
raises some concerns and investors could benefit from more clarity on a few items," said
Canaccord Genuity analyst Kingsley Crane.
    "It is not necessarily a systemic risk and should not affect other AI stocks near-term.
These stocks are traded on (AI) excitement."
    C3.ai did not immediately respond to a request for comment.
    Despite Tuesday's tumble, the stock has more than doubled in value thanks to a surge of
investor interest in AI-related companies after the viral success of OpenAI's ChatGPT. That
compares with a 6.8% rise in the benchmark S&P 500 index  .SPX .
    The rally has somewhat slowed in recent days as concerns rise over the use of AI and
countries move to regulate its applications.
    On Tuesday, U.S. President Joe Biden said it remains to be seen whether AI is dangerous, but
underscored that technology companies had a responsibility to ensure their products were safe
before making them public.

 (Reporting by Tiyashi Datta and Yuvraj Malik in Bengaluru; Editing by Shailesh Kuber)
 ((tiyashi.datta@thomsonreuters.com;))