C3.ai vs. Applied Digital: Which Artificial Intelligence Stock Is a Better Buy in 2026?
Key Points
C3.ai provides enterprise AI software through strategic cloud and industrial partnerships.
Applied Digital develops the critical high-performance infrastructure required to host heavy AI workloads.
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The artificial intelligence revolution offers two distinct paths, software or the hardware that powers it. Choosing between C3.ai (NYSE:AI) and Applied Digital (NASDAQ:APLD) depends on your appetite for risk.
C3.ai specializes in providing enterprise-grade software that helps businesses deploy AI at scale. Applied Digital focuses on the physical side, building the high-performance data centers needed for intensive computing. While both companies aim to capitalize on the AI boom, they operate in different niches, offering unique risk profiles for investors.
The case for C3.ai
C3.ai operates among tech stocks by selling the C3 Agentic AI Platform to help large organizations deploy artificial intelligence applications. The company relies on strategic partnerships with major names, such as Baker Hughes and Microsoft, to serve as sales channels to reach global industrial and cloud customers. Customer concentration like this adds a layer of risk to the business, as a handful of large contracts currently drive the majority of its total revenue.
In its 2026 fiscal year (FY) ended April 30, revenue reached $250.3 million, representing a decline of 35.7% compared to the previous fiscal year. This revenue drop occurred alongside a net loss of $470.4 million as the company navigated a major transition toward a consumption-based pricing model. The net margin, which measures the percentage of revenue remaining after all expenses are paid, was -187.9%.
As of its April 2026 balance sheet, the debt-to-equity ratio is zero, indicating the company carries no debt relative to its shareholder equity. The current ratio, which measures the ability to pay short-term debts, is 6.6x. Free cash flow was -$190.7 million, a figure representing the cash remaining after accounting for money spent on equipment and infrastructure.
The case for Applied Digital
Applied Digital builds the physical infrastructure required for modern computing, operating data centers for high-performance hosting and cloud services. The company has secured long-term leases with firms like CoreWeave, providing $36.2 billion in contracted revenue over 15-year terms at sites like Polaris Forge. Customer concentration like this adds a layer of risk to the business, especially since the hosting segment depends on a very small number of hyperscalers.
In FY 2026 ended May 31, revenue reached $611.3 million, marking an increase of 183.7% over the prior fiscal year. Despite this rapid growth, the company reported a net loss of $250.3 million for the period. The net margin, which represents the amount of profit earned on every dollar of sales, was approximately -39.9%.
As of its May 2026 balance sheet, the debt-to-equity ratio is 2.9x, meaning total debt is nearly three times shareholder equity. The current ratio is approximately 4.0x, suggesting it maintains a cushion to cover its short-term obligations. Note that stock-based compensation represented 245.5% of operating cash flow, meaning reported cash generation is heavily inflated by this non-cash add-back.
Risk profile comparison
C3.ai faces risk from customer concentration, as a small group of clients provides the bulk of its revenue. If partners like Baker Hughes were to deliver lower sales, the financial impact would be immediate and severe. The company also competes against other tech companies for AI business while navigating evolving regulations like the EU AI Act.
Applied Digital navigates risks related to its capital-intensive model, which requires billions of dollars for data center construction. High debt levels limit its flexibility, while reliance on a few large customers poses a threat to future cash flow. Additionally, construction bottlenecks at sites like Polaris Forge or disruptions to the power supply could significantly impact operations.
Valuation comparison
C3.ai has a lower P/S ratio, which compares price to sales. Applied Digital has a higher Forward P/E, which measures price against future earnings estimates.
| Metric | C3.ai | Applied Digital |
|---|---|---|
| Forward P/E | 26.1x | 968.7x |
| P/S ratio | 6.3x | 13.7x |
Valuation metrics sourced from Financial Modeling Prep (FMP) and may differ from other data providers.
Which stock would I buy in 2026?
Deciding between artificial intelligence companies C3.ai and Applied Digital is a complex choice. C3.ai was seeing success under CEO Thomas Siebel, but revenue started to decline after he resigned from the CEO position due to health issues. The company announced his return in June, but it will take time for Siebel to undo the damage.
Applied Digital is experiencing spectacular sales growth, but its debt load is rising quickly as it builds new data centers to capture the massive AI demand for computing infrastructure. It ended its 2026 fiscal year with nearly $5 billion in debt, up substantially from the prior year’s $677.8 million.
Moreover, a major customer for Applied Digital is CoreWeave, which has amassed about $25 billion in debt at the end of Q1. If CoreWeave runs into financial trouble, that could impact Applied Digital.
Weighing these various factors, I would choose to invest in Applied Digital over C3.ai. Applied Digital’s revenue growth illustrates its success at capturing demand for artificial intelligence infrastructure. It recently signed a 15-year lease with a major hyperscaler, which helps to offset the risk inherent in CoreWeave. Until C3.ai can prove it’s able to turn its sales around, I would hold off on buying.
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Robert Izquierdo has positions in C3.ai, CoreWeave, and Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
