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Technology Stocks : C3ai
AI 27.99-0.9%3:01 PM EDT

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From: Savant5/31/2024 2:11:13 PM
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*dog that hunts, vs dogs that don't hunt*.>>

In the middle of a rough stretch for enterprise software companies, on Wednesday managed to post better-than-expected results for its April quarter. The company has shown accelerating top-line growth for five straight quarters, returning to 20% growth in the latest period for the first time since 2022. And that has the stock up 17% on Thursday,

That stands in contrast to Wednesday's disappointing results from, which is down 20% on Thursday, and UiPath, off 34%. Workday recently reported a similarly poor quarter.

There is a growing view that enterprise IT budgets are tightening, and the trend is rippling across the sector. That raises an obvious question: What makes so special? CEO Tom Siebel thinks the answer is straightforward. While budgets are tightening for conventional enterprise software, he says, companies are spending without any real budgetary constraints on AI applications. Siebel thinks many of the established AI companies are struggling to adapt their legacy applications to an AI world.

"These guys have technology stacks that they built literally in the last century," Siebel said in an interview with Barron's. "What they do is they've taken an AI sticker and put it on the front of their box -- ServiceNow, Salesforce, Workday, Oracle, SAP. I'm not really sure that dog hunts. The difference between us and them is that we're native enterprise AI. I started building this AI software stack 15 years ago, and today we have 90 turnkey enterprise applications. We're in a different place than they are."

Siebel says AI could actually be a headwind, rather than an accelerant, for some enterprise software companies as spending priorities shift.

"It's definitely not a headwind for us," he says. "Where we are, I'm not really sure there are any budgets. These guys just make the budgets up. This is happening at the CEO level, or the person who runs manufacturing level, and they don't need a budget. Managers write a check and go."

Siebel points out that all of the chips that Nvidia is selling are being used to build out AI infrastructure to run AI applications. "These guys are building hardware for us. They're out there laying pavement 100 miles ahead of us so we can roll into it."

The chief, who was also the founder of the customer relationship management software company Siebel Systems, which was acquired by Oracle in 2006, adds that enterprise software companies are suffering in part from a lack of innovation beyond AI.

"I mean, who doesn't have CRM installed?" he asks. "Who doesn't have an enterprise CRM license? Everybody's got it. They've got to have something new."

Meanwhile, Siebel also makes the case that more of the value in the AI food chain will eventually go to AI software companies.

"Let's look at the AI stack," he says. "At the bottom we have silicon, and above that we have infrastructure. Above that we have foundational models, and on top of that we have applications. The bulk of the value in the market today is being attributed to silicon and infrastructure. It was the same thing in the PC market in 1990. But as we saw in PCs, in the long run, the value is in the application layer, and that's where we play. In the long run, silicon gets commoditized, because it always does, and the infrastructure gets commoditized, because it always does. We've seen this movie before."
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