On June 22, the Middle East geopolitical conflicts between Israel and Iran took a dramatic turn after the United States entered the war. B2 fighter jets of the United Staes bombed three major underground nuclear sites of Iran. In retaliation, Iran has threatened to close the Strait of Hormuz, known as the entry/exit point of the Persian Gulf. Iran also targeted U.S. bases in nearby Middle East.
These developments are likely to benefit stocks that are associated with the defense and oil and energy sectors. One beneficiary could be a little-known enterprise artificial intelligence (AI) software provider C3.ai Inc. AI. This mid-cap player in the AI automation sector specializes in enterprise AI applications, including predictive maintenance and generative AI tools.
Positive Catalysts
In FY 2025 (ended April 30, 2025), C3.ai booked more than 30% of its contracts from federal, state and local governments. Notable among them is the U.S. Air Force, which extended its contract in May. The company’s AI-enabled software is used to identify U.S. Air Force planes that needs immediate or precautionary maintenance.
Moreover, C3.ai generated over 20% of its FY 2025 bookings from the oil and energy companies. Several financial researchers have warned that crude oil price can touch $100/barrel as the Middle East conflict has heightened. In May, C3.ai extended its existing contract with Baker Hughes Co. (BKR) through June 2028. Through this venture, the company clinched deals with Exxon Mobil Corp. (XOM) and Shell plc (SHEL).
C3.ai has positioned itself as a pure-play enterprise AI software company. Central to the company’s growth strategy is its deepening alignment with major cloud providers and government institutions. The company has tie-ups with giant cloud providers like Microsoft Corp. (MSFT), Alphabet Inc. (GOOGL) and Amazon.com Inc. (AMZN).
Product Differentiation and Competition
While the broader infrastructure buildout continues to attract headlines and capital, C3.ai’s thesis is that enterprise value accrues not at the hardware or model level, but where actionable AI is deployed. As enterprises seek production-ready solutions atop robust infrastructure, C3.ai’s differentiated platform could see a long-awaited lift.
Despite being the pioneer in turnkey enterprise AI applications, C3.ai is facing a tough competitive landscape. Notable competitors are Palantir Technologies Inc. PLTR and Snowflake Inc. SNOW.
Palantir is gradually shifting toward commercial AI platforms from its core government analytics contracts. On the other hand, Snowflake is evolving toward a full AI-data platform with tight integration with cloud infrastructure.
Lucrative Valuation for AI Stock
The stock price of C3.ai lagged significantly in 2025 with a negative return of 32% year to date. However, in the past month, the stock price has increased 3.8%. We expect the momentum to continue in the near term owing to the positive factors mentioned above. C3.ai currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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C3.ai has an expected revenue and earnings growth rate of 20.1% and 9.8%, respectively, for the current year (ending April 2026). The Zacks Consensus Estimate for current-year earnings has improved 21.3% over the last 30 days. The company delivered positive earnings surprises in the last four reported quarters with the average beat being 49%.
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Impressive Short-Term Price Upside for AI Shares
The short-term average price target of brokerage firms for the stock represents an increase of 27.5% from the last closing price of $23.41. The brokerage target price is currently in the range of $18-$50. This indicates a maximum upside of 113.6% and a downside of 23.1%.
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This article originally published on Zacks Investment Research (zacks.com).
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