Gamestop and C3 Report After AI Darling Nvidia

After the artificial intelligence (AI) sector saw Nvidia's earnings fall short of high expectations, two iconic companies may provide insight into ongoing interest in the space.

Beating a Rising Bar

Nvidia's recent rare drop in share price following the earnings release showed that investors remain optimistic about AI's potential for strong growth. However, they remain cautious about such projections and quickly sell on negative news. This could lead to increased volatility, especially as uncertainty grows around the pace of U.S. economic growth and technology spending in light of expected interest rate changes. C3.ai's work in AI applications may offer insight into current demand. Meanwhile, GameStop's performance could gauge the retail sector and broader risk appetite.

In the AI field, C3.ai is an example of a company attracting investor interest based on its work in AI. However, its revenue growth has not yet translated to improved profitability. The company is due to report earnings after the close on Wednesday, with sales projected to increase to $86.9 million from $72.4 million last year. Despite this, earnings per share are forecast to decline to -$0.13 from -$0.09 previously.​

The Elusive Profits in Tech

Taking losses to expand income is common for growth companies seeking to capitalise in new markets and works well when capital is cheaply available. However, companies must eventually improve margins. C3.ai has yet to do so, reporting unchanged gross margins year-on-year. Markets may be more optimistic if it improves profit margins or raises full-year guidance.

GameStop is due to report quarterly earnings after market close on Monday. This could excite retail traders who are focused on how the company will deploy accumulated capital from share issuances. In the prior quarter, it held nearly $1 billion in cash while narrowing losses and sales differences. Analysts expect worse losses of $0.08 per share compared to previous losses of $0.03 on slightly higher sales of $895.7 million versus $881.8 million last quarter. However, investors will likely scrutinise guidance, especially CEO Ryan Cohen's capital plans.​

C3 in Long-Term Triangle?

The share price of C3 has declined over 50% from its June high, but technical analysis reveals a symmetrical triangle pattern may be forming. Should the triangle complete towards the lower boundary above $20 per share, prices could increase beyond $26 to the $30 handle and then 31.50 and 33.20. Alternatively, further weakness below $17 may result in a test of the previous $15 low, potentially paving the way for a low of $10.

Source: SpreadEx C3.AI

Key Takeaways

C3.ai and GameStop may provide insight into ongoing interest in AI after Nvidia's earnings fell short of expectations. C3.ai attracts investor interest based on its work in AI applications, though revenue growth has yet to improve profitability. It is due to report earnings on Wednesday, with sales projected to rise but earnings per share forecast to decline. GameStop is due to report quarterly earnings on Monday, which could excite retail traders who are focused on how it will deploy accumulated capital from share issuances. Analysts expect worse losses but slightly higher sales, though investors will scrutinise guidance and CEO Ryan Cohen's capital plans.​