As Russia what it wants from its Ukraine invasion, money-losing growth stocks like C3.ai (NYSE:AI) are not where investors want to be.

Shares in the maker of enterprise artificial intelligence software peaked soon after their December 2020 debut. The spike was as high as $161 a share. It’s lost almost 36% of its value in 2022, including declines on eight of the past 10 days of trading.

Still, the company has been growing. Revenue was $49 million a year ago. It’s expected to be $68 million for the January quarter, when that’s reported March 2. Losses, however, have also been expanding. They were 17 cents a share a year ago. They’re estimated at 63 cents a share for the latest quarter.

AI Stock Has DOD ‘Umbrella’

The good news, for AI stock investors, is that C3.ai is under the umbrella of the Defense Department. The CEO is Thomas Seibel, who became a billionaire after selling his Seibel Systems to Oracle (NYSE:ORCL) during the 2000s. Stories around the AI stock IPO were headlined “Seibel is back” and “Seibel does it again.”

He certainly did. He began selling his 10% stake last March, at $84 a share. Other officers and directors were selling around the same time. No one batted an eye. Taking something off the table after a successful IPO is how entrepreneurs get paid. Given what has happened to the shares since, the plaintiff’s bar takes a dimmer view.

Founded during the Obama Administration, C3.ai has been getting a steady flow of defense contracts since. These involve things like predictive maintenance, security clearances and developing trajectories for incoming missiles. The biggest carrot is still dangling, a $500 million “contracted vehicle.” This is defense speak, meaning the money’s authorized and the goal is assigned but the contract isn’t signed and it’s not in the company’s order backlog.

Matters of Survival

The main question for investors today is whether C3.ai can survive on its own. There were 970 million reasons to believe it could at the end of October. That’s how much it had in cash and short-term investments on the balance sheet on that date. Stack that up against operating cash flow that was just negative $18 million for the six months ending in October and it looks to be in good shape.

You can think of C3 as a companion to Palantir (NYSE:PLTR), the controversial “big data” defense contracting company. Both stocks have been on a consistent trajectory over the last year, down. AI stock is down 81%, that of Palantir 61%. While that’s bad for shareholders, the current fighting in Ukraine and threats from China mean both business models look more sustainable than many other fast-growing software companies.

That’s not the same thing as being ready for a bull run. At least in the near term, everyone is going to hunker down. Russia is a nuclear power. Things could get weird. But after the smoke clears, companies with a defense orientation are going to look better than those in the civilian space. Putin’s ambitions are going to leave a mark.

The Bottom Line

As investors rush to quality in the wake of the Russian invasion, ask how they will define it.

Many define it as cash. Others see it in gold, or in oil.

When it comes to software, it could be defined in sustainability. Analysts will be looking at contracts, at relationships and trying to guess whose can hold up best.

C3.ai is worth about $2 billion on what look like annual revenue of $200 million. That still looks high. But it does look solid, as do its growth prospects, especially with a possible $800 billion defense authorization coming for fiscal 2023. There’s a defensible bid underpinning this stock, so you should keep an eye on it.

On the date of publication, Dana Blankenhorn held no positions in companies mentioned in this story. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.