The technology industry is seeing a growing divergence between the haves and the have-nots, with the haves increasingly concentrated among a handful of multi-trillion dollar companies with strong positions in AI and cloud infrastructure. That is raising the idea that a huge wave of dealmaking is coming.
In the have-not category, companies will need to find suitors before the musical chairs end. All options are now on the table for enterprise AI services company C3 AI, with its stock price recently hitting new lows following the exit of tech legend and former CEO Tom Siebel and bad financial results.
C3 AI, founded by Siebel, was arguably one of the first high-profile AI services companies in the market. Yet, since its IPO in 2020, the company’s performance has been miserable and surpassed by many competitors such as Palantir in the AI boom. C3 even has the best ticker symbol in the industry—AI.
A worker cleans windows at the C3.ai pavilion ahead of the World Economic Forum (WEF) in Davos, Switzerland, on Monday, Jan. 20, 2025. Photographer: Stefan Wermuth/Bloomberg
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What’s that ticker symbol worth? With a modest market capitalization of only about $2.5 billion and about $400 million in annual sales, C3 could make a nice snack for a trillionaire. C3’s chief attraction is enterprise and government contracts in AI services. It could be attractive to one of its partners—which include Amazon, Google, and Microsoft—or perhaps an AI-focused company such as NVIDIA or OpenAI, as they look to diversify into additional enterprise services.
Dan Ives, in influential technology analyst at Wedbush, believes C3 is an obvious M&A target. He recently put the company on his list of targets and wrote about a favorable environment for a “floodgate” of tech deals that he expects.
“With the regulatory landscape becoming more lenient to acquisitions with the new administrations stepping in and no longer representing steep hurdles, we believe that the tech M&A floodgates are ready to be opened as more opportunities arise to add accretive assets with an easier path forward,” Ives wrote in a recent investor note.
Scott Galloway, a professor at NYU Stern as well as a tech founder and podcaster, also spoke of the potential for an explosion of tech M&A on his Prof G Markets podcast. He pointed out that growing divergence among tech companies and explosive share gains in NVIDIA and OpenAI providing grist for the M&A mill.
From IPO to Low
You might be asking, how did C3.ai get here? As hard as it is to imagine, in the middle of the AI boom, the company’s shares have been in freefall after it preannounced in August that fiscal first-quarter results would miss guidance by 30%. But just the latest blip an ongoing trend of years of poor execution.
When AI was just a glimmer in most investors’ eyes, C3 AI went public in an IPO on December 9, 2020, at a price of $42 per share. Expectations were high. The IPO raised approximately $650 million and attracted significant investor interest, with shares opening much higher and reaching a record high shortly after trading began.
The riches were short-lived. A massive decline started in early 2021, which accelerated during the tech correction of 2022. With slow growth, accumulated losses, and changes in the macroeconomic environment, C3 stock was plumbing all-time lows near $10 in 2023. Then the stock rebounded on the hopes that the company could take advantage of big AI trends in 2023, rising as high as $50. But this year, those hopes have been dashed due to poor execution and the departure of Siebel. Today shares are trading at around $18, 60% below the IPO price five years ago.
M&A Opportunity: Enterprise AI Revenue
The good news? New C3 CEO Stephen Ehikian has plenty of resources as well as plenty of time. The company has approximately $700 million in cash reserves against recent annual negative cash flow of $80 billion. It has a nice cushion to drive toward break-even—or find a buyer.
Its biggest asset might be PANDA, a predictive maintenance platform contract with the U.S. Air Force. PANDA delivers near-real-time insights by monitoring components on hundreds of aircraft, including the B1-B Lancer, C-5 Galaxy, KC-135 Stratotanker, C-17 Globemaster III, and C-130J Super Hercules. That current Air Force contract is pegged at $450 million over several years.
C3 is also ramping up its partnerships with cloud providers. It recently pivoted its sales strategy, placing the emphasis on partnership with large tech firms. The company’s deals with major tech companies like Microsoft, AWS, and Google Cloud accounted for more than 70% of sales in a recent quarter, showing a 68% year-over-year rise in partner-driven deals during fiscal 2025. The partnership with Microsoft is especially strong, with C3 applications integrated into Azure’s sales catalog and multiple joint agreements closed targeting manufacturing and chemical sectors.
Efforts also include partnerships with consulting firms like PwC and McKinsey’s QuantumBlack.
With its small market capitalization and solid enterprise and military contracts, C3 might make sense for companies looking to diversify after a rapid rise in stock prices.
For example, Galloway has pointed out that NVIDIA and OpenAI have been injected with huge liquidity with the massive rise in their valuations. With a market capitalization of only $2.6 billion, C3 could represent a low-risk entry into customer relationships and government services contracts.
Why would NVIDIA be interested? The recent Futuriom Enterprise AI Index data show that NVIDIA is gaining traction in enterprise AI services projects, which could prove synergistic with C3 customer base. Among more than 150 enterprise case studies we tracked, NVIDIA AI Enterprise services was in the top six platforms used in enterprise AI deployments.
C3 could also make a digestible acquisition for one of its large hyperscaler partners such as Amazon, Google, or Microsoft, all of which are looking to add to their enterprise AI services revenue.
Futuriom research shows that NVIDIA AI Enterprise services are among the top enterprise AI platforms.
Futuriom.com
Moving into Agentic AI
C3 has also touted prospects in the generative AI space, with 100% year-over-year revenue growth from gen AI and agentic AI initiatives. It lists 66 initial production launches across 16 sectors, showcasing a foothold in enterprise AI applications. The company holds a patent for agentic AI and has over 100 deployed solutions in key sectors like defense and manufacturing.
Moving forward, stabilization is key, whether or not C3 seeks a deal. In addition to the PANDA contract, subscription AI revenues contribute $60 million, giving it a nice base. The most important goal of the company will be to boost margins. In the most recent stock plunge, investors were spooked when gross margins plunged.
Wall St. analysts project revenue growth of over 18% for the coming year, according to consensus forecasts, signaling a potential rebound from recent declines.
CEO Ehikian has a lot of opportunity, but it seems that the most likely chance of success will come through a sale. The partner-led sales strategy shows that the company might be best placed in the hands of a stronger owner.
Futuriom provides paid research and marketing services to technology companies, with the goal of providing accurate insight into how cloud and AI infrastructure markets are evolving. These services include subscription research, custom research, and report sponsorships. In the past twelve months, Futuriom has not been paid by c3 AI, NVIDIA, or OpenAI. The author holds no positions in individual technology stocks mentioned in this article.