Beyond the Hype: Why C3.ai and Upstart Are the AI Growth Stocks to Watch

The AI revolution isn't just about chips. While NVIDIA dominates the hardware spotlight, two software-driven companies—C3.ai (AI) and Upstart (UPST)—are quietly building scalable AI platforms in underserved markets. Both reported standout Q1 2025 results, yet trade at discounted price-to-sales (P/S) ratios despite addressing multi-trillion-dollar opportunities. Here's why investors should look past the headlines and consider these underappreciated AI leaders.

C3.ai: The Enterprise AI Play with Rocket Fuel

C3.ai's Q1 results underscore its position as a leader in AI-driven enterprise software. Revenue hit $87.2 million, up 21% year-over-year, with subscription revenue at 84% of total sales—proof of its recurring revenue model. Gross margins are robust: 70% non-GAAP, reflecting the scalability of its cloud-based AI solutions.

The company's momentum is undeniable. It closed 71 agreements in Q1, a 122% YoY jump, with wins in manufacturing (e.g., Nucor's supply chain optimization), energy (Eletrobras), and the U.S. Federal sector (30% of bookings). Notably, C3 Generative AI is already generating pilots in agriculture, government, and logistics. Riverside County, CA, is using it to automate property appraisals, while the Marine Corps deploys it for intelligence analysis.

Why it's undervalued:
C3.ai trades at a forward P/S of 6.64, down sharply from its 2020 peak of 75x but still above peers like Asana (3.83) and Braze (3.77). This discount ignores its 20%+ revenue growth and a $762.5 million cash hoard. With federal contracts surging (25 state/local deals, 30% of Federal bookings) and generative AI unlocking new use cases, C3.ai's $12 trillion addressable market in “agentic AI” (decision-making automation) is vastly underpriced.

Upstart: AI-Driven Lending with a 20% EBITDA Margin

Upstart's AI platform is revolutionizing consumer finance. Q1 revenue jumped 67% to $213 million, with $2.1 billion in loan originations—a 102% YoY increase. Even more impressive: 90% of loans are fully automated, slashing costs and driving a 20% Adjusted EBITDA margin, up from a negative 16% in 2024.

The company's AI underwriting adapts to macro shifts, evidenced by improving loan performance metrics. With $599.8 million in cash and plans to turn GAAP net income positive in 2025, Upstart is proving skeptics wrong. Its “AI Day” in May 2025 likely signaled new tools to expand its $1 trillion addressable market in AI-driven loan fees.

Why it's a bargain:
Despite 67% revenue growth, Upstart's P/S ratio dropped to 6.53 in Q2 2025 from 8.3 in late 2024. This multiple contraction overlooks its path to profitability and a 23.43% annual revenue growth rate. At this valuation, investors get a lean, scalable platform with a 28% upside to analysts' average price target of $69.46.

The Case for Both: Growth at a Discount

Both companies benefit from secular tailwinds:
- C3.ai targets enterprises' $12 trillion spend on agentic AI, where its platform is already embedded in critical infrastructure (e.g., defense, energy).
- Upstart leverages its AI to capture a slice of the $1 trillion in global loan fees, with a moat in automated underwriting.

Their P/S ratios are now below industry medians, even as their growth rates outpace peers. C3.ai's 21% revenue growth vs. the SaaS sector's average of ~15%, and Upstart's 67% vs. fintech's ~20%, suggest these stocks are mispriced.

Risks and Investment Thesis

• C3.ai's net losses ($0.05 non-GAAP per share) and Upstart's regulatory risks (e.g., interest rate sensitivity, lending regulations) are valid concerns.
• BUT: C3.ai's free cash flow turned positive ($7.1M in Q1), and Upstart's EBITDA is accelerating. Both have strong cash reserves to weather near-term headwinds.

Buy Signal:
Investors seeking AI exposure beyond GPUs should allocate to C3.ai and Upstart. Their discounted P/S ratios, coupled with dominant AI-driven niches and multi-year growth runway, make them buys at current levels.

Final Note: AI's next phase isn't just about processing power—it's about applying it to real-world problems. These two stocks are doing just that, and the market has yet to fully price in their potential.