C3.ai plunges 26% after short-seller says the buzzy AI company has 'serious accounting and disclosure issues'

• C3.ai plummeted 26% on Tuesday after a short seller alleged serious accounting issues.
• Kerrisdale Capital said in a letter that C3.ai has inflated metrics to meet analyst estimates.

C3.ai, the buzzy artificial intelligence stock that has soared amid the ChatGPT hype, plummeted on Tuesday after short-seller Kerrisdale Capital released a letter accusing the company of serious accounting issues.

C3.ai shares tumbled shortly after Kerrisdale released an open letter to C3.ai's own audit committee, Deloitte & Touche executives, and regulators at the Security and Exchange Commission on Tuesday afternoon. Shares ended the day down 26% to close at $24.95.

The letter accused the AI firm of various "fraudulent accounting conventions," pointing to details such as "opaque, indecipherable language" in the company's financial filings, and high turnover within the company's chief financial officer position.

"In our opinion, C3.ai has utilized highly aggressive accounting to inflate its income statement metrics in order to meet sell-side analyst estimates for revenue and certain profit metrics, and to conceal significant deterioration in its underlying operations," the letter read. "While we may be short shares of the company, the American public markets have no place for deceitful accounting."

C3.ai shares have more than doubled in 2023 as investors flocked to artificial intelligence stocks following the viral success of OpenAI's ChatGPT.