Founded in 1993 by brothers Tom and David Gardner, The Motley Fool aims to make the world smarter, happier, and richer. Their platform includes a website, podcasts, books, newspaper column, radio show, and premium investing services that help millions of people achieve financial freedom. While reading this free article, it's important to note that the opinions expressed may differ from The Motley Fool's Premium Investing Services. To gain instant access to their top analyst recommendations, in-depth research, and investing resources, consider becoming a Motley Fool member. One might assume that Nvidia dominates the artificial intelligence (AI) market this year. However, there is another stock that has experienced even more remarkable gains. The shares of C3. ai (AI 3. 81%) have surged over 250% year-to-date, making it a potential standout in the industry. Is this momentum expected to continue?The answer is not clear-cut. There is one significant factor that could propel the AI stock to even greater heights. To understand why C3. ai is currently generating so much excitement, one needs to look at its stock ticker: AI. Investors have shown great enthusiasm for anything related to artificial intelligence. C3. ai offers a range of enterprise AI applications, supporting customer relationship management (CRM), cash management, supply chain, and more. The CEO, Tom Siebel, who also founded Siebel Systems (acquired by Oracle in 2006), possesses over 56% of the voting power of C3. ai's outstanding shares. The company's fiscal 2023 fourth-quarter results, announced in May, indicated a highly active business environment for enterprise AI, with signs of acceleration. This announcement triggered the soaring trajectory of C3. ai's stock. While the share price of C3. ai has stabilized in recent weeks, there is one potential factor that could reignite its upward surge. As of June 30, 2023, over 36% of C3. ai's stock float was sold short, suggesting a substantial bet on the stock's impending decline.

However, what if the short-sellers are wrong, and C3. ai experiences another surge in share price?In such a scenario, a massive short squeeze could occur, with short-sellers rushing to cover their positions, potentially propelling C3. ai's stock up by 50% or more. Several catalysts could contribute to this short squeeze, such as positive news for another AI stock that creates a spillover effect. Additionally, C3. ai's fiscal 2024 Q1 results, set to be announced in approximately one month, could surpass analysts' expectations and serve as a catalyst for further price appreciation. On May 15, 2023, C3. ai released the results of its investigation into allegations made by two short-sellers, Spruce Point Capital Management and Kerrisdale Capital Management. The company declared that none of the allegations were supported by factual evidence. Interestingly, instead of decreasing, the short interest in C3. ai's stock actually increased following this update. Given the current momentum, it would be unwise to bet against C3. ai (or any other AI stock). However, caution should also be exercised when considering investing in C3. ai, as the company has yet to achieve profitability. Traditional earnings-based valuation metrics may not apply here. The stock is currently trading at a forward price-to-sales multiple of over 14x, which could be a cause for concern regarding the justification of its premium valuation. With the potential for significant gains and the risk of substantial losses, investors in C3. ai, particularly short-sellers, need to proceed carefully. Disclosure: Keith Speights has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia and recommends C3. ai. The Motley Fool has a disclosure policy. Please note that past performance of recommendations may vary. For a comprehensive investing experience, consider joining The Motley Fool's premium services, which provide stock recommendations, portfolio guidance, and more to help you make informed investment decisions.