Box Spikes as VC Investor Applauds AI Potential

Shares of Box Inc. (BOX) jumped the most in three years after prominent venture capitalist Chamath Palihapitiya, the CEO of Social Capital, called the enterprise software provider “incredibly cheap and undervalued" and recommended that investors go long on shares of the cloud company. BOX stock jumped as much as 16% on Monday to $23.95, ultimately closing up 11% at $22.91. The rally brought the stock's year-to-date (YTD) return to 8.5% and its 12-month increase to 36.4%, outperforming the broader S&P 500's roughly flat and 13.7% gain over the same respective periods. 

At the Sohn Investment Conference in New York on Monday, Palihapitiya, a former member of Facebook Inc.'s (FB) executive team, touted the Redwood City, California-based company's opportunity in the burgeoning artificial intelligence (AI) space.  The high-profile investor indicated that "if you believe and care about AI ... be long on Amazon.com Inc. (AMZN), be long on Alphabet Inc. (GOOGL), but frankly, be long Box." (See also: Microsoft Warms Up to Former Rival Linux.)

The 13-year-old company, which helps businesses manage content in the cloud, unveiled a new AI toolkit in October that allows its customers to use image recognition and text, audio and video-searching tools from companies like Google, Microsoft Corp. (MSFT) and International Business Machines Corp. (IBM) in order to better manage and extract data from their media files. 

Box Poised to 'Create Incredible Value' 

CEO Aaron Levie founded Box out of a renovated garage with a team of childhood friends, choosing to drop out of college after a blind investment of a few hundred thousand dollars from angel investor Mark Cuban. With Levie at the helm, the file-sharing company turned down a $600 million offer from Citrix. 

In March, BOX shares lost nearly a fourth of their value on earnings results wherein investors feared thinning future cash flows. Despite pessimism, Levie has remained upbeat on the ability for Box's new product offerings and better customers to drive revenue to $1 billion by 2020. 

Palihapitiya has watched Box's evolution in a space disrupted by machine learning and AI, calling it a "really interesting disruptive company," that "sits on top of an enormous amount of R&D."

"It's really critical to understand what AI is, what it can do, what it can't do, and who is actually positioned to create incredible value over the next 10 to 20 years," he added. (See also: Tech Still Reigns Over the Market: Credit Suisse.)