Palantir's AI-Driven Success: Stock Soars Amid Market Speculation

Is Palantir Stock Set to Soar Again in the New Year? | The Motley Fool

Palantir (PLTR 6.25%) was one of the best-performing stocks of 2024. The analytics and software management platform for government agencies, the military, and big business soared 340% for the year and sports a market cap of $167 billion as of this writing. Shareholders of Palantir no doubt appreciated the company's performance in 2024, but investors are likely looking at the new year and asking themselves: Can Palantir keep up this momentum? Time to dig into the fundamentals of this fast-growing company and find out. Incredible returns like those Palantir experienced in 2024 often come from accelerating growth. Excitement around the business has become real momentum for the stock as Palantir has accelerated its revenue growth for five straight quarters, thanks to the popularity of its artificial intelligence (AI) analytical tools. Commercial revenue in the United States was up 54% year over year in Q3 2024, hitting a record high of $179 million for the segment. This fast-growing opportunity in the private sector has been a core driver of Palantir stock's recent gains. That said, its public-sector business continues to expand as well with U.S. government revenue up 40% year over year last quarter to $320 million. This is still Palantir's largest segment as the company got its start serving the military, intelligence services, and other government agencies. The company saw its weakest performance last quarter outside the U.S. with international government and commercial revenue up 13% and 3%, respectively. Palantir was able to accelerate its overall revenue growth despite challenges in Europe and the Middle East, and if this top-line trend holds in 2025, the stock is likely to keep rising. It's hard to bet against that kind of momentum, at least in the short term. With annual revenue of more than $2.5 billion, the increased scale has allowed Palantir to generate healthy profits. Last quarter, its GAAP (generally accepted accounting principles) net income margin was 20%, while its operating margin was 16%, and it's likely these margin figures will keep expanding over the next few years. If the company sustains its 30% revenue growth rate, the company will clear $10 billion in annual revenue by 2029. Assuming its net margin also hits 30% during this period, you get about $3 billion in annual earnings for this AI and software giant. As bullish as such an outlook may seem for Palantir, its share price already reflects investor expectations that are as optimistic as what I described above -- perhaps even more so. With a market cap of $167 billion, the stock boasts a price-to-earnings ratio (P/E) of more than 60 based on its ability to eventually generate $3 billion in annual earnings. But that five-year forward multiple is still nearly triple the S&P 500's forward P/E ratio of 22, which is based on the next 12 months. Looking at the valuation in another way, the stock has a trailing price-to-sales ratio (P/S) of 68. The pandemic rally was the last time investors drove up growth stocks to such astronomical valuations, and buying at those elevated prices proved to be a costly mistake for many investors. Palantir's P/S ratio is one of the highest in history, so the market's expectations for its growth are similarly high. No one knows exactly what what Palantir stock will do in 2025. However, if the company keeps accelerating its revenue growth quarter after quarter, the stock could still add to its 2024 gains. Regardless of what you think about Palantir's near-term momentum, though, those who focus on buying and holding quality stocks for the long haul need to pay attention to the price they pay for a stock and how much in earnings and cash flow the company will realistically generate for shareholders over the next five years and beyond. Today, Palantir's market cap of $167 billion seems wildly out of line with what it can earn in the future, even in the most bullish of scenarios. For this reason, investors should avoid buying shares of Palantir stock in 2025.

Where Will Palantir Stock Be in 2 Years? | The Motley Fool

Palantir Technologies (PLTR -2.01%) stock simply took off in 2024, registering eye-popping gains of 340% as of this writing and handsomely crushing the 23% gains registered by the Nasdaq Composite index during the year. The company, known for supplying software platforms and analytics to both federal and commercial customers, has been in the limelight thanks to the rapidly growing demand for its artificial intelligence (AI) software platform that enables clients to integrate generative AI into their operations. The proliferation of AI software has led to a pickup in Palantir's growth of late, suggesting that the company is well on its way to making the most of a solid long-term growth opportunity. Here's a closer look at Palantir's long-term growth drivers and whether this high-flying AI stock can sustain its impressive rally over the next couple of years. AI software platforms allow organizations and governments to develop, test, deploy, and manage AI applications in the cloud. The demand for these platforms has picked up remarkably in the past couple of years as companies have been finding ways to make their operations more efficient by integrating generative AI into their businesses. Palantir was ranked among the top five AI software platform providers in 2023 by market research firm IDC, along with big names such as Microsoft, Alphabet's Google, and Amazon. The good part is that Palantir has been able to cut its teeth in the AI software platforms market despite the presence of big tech companies with deep pockets and established cloud infrastructures. This is evident from the company's quarterly results in 2024. Palantir's top line in the first quarter of 2024 was up 21% year over year, followed by a 27% increase in Q2. The company reported a 30% year-over-year jump in revenue in the third quarter of 2024 to $726 million. Palantir's revenue in the first nine months of the year stands at just over $2 billion, an increase of almost 27% from the same period last year. That's a big improvement over the 15% year-over-year increase in Palantir's revenue in the first three quarters of 2023. A key reason why Palantir's growth accelerated in 2024 is because of its aggressive go-to-market strategy of landing customers for its Artificial Intelligence Platform (AIP). The company conducted "boot camps" that helped customers understand how to integrate generative AI into their operations in just five days. Palantir reportedly held over 500 boot camps in 2023. It ramped up that number significantly in 2024, conducting an average of almost five boot camps daily. The results have been positive as the boot camps led to robust growth in Palantir's customer base. Its customer count in the third quarter of 2024 increased 39% year over year to 629, with the number of commercial customers growing at a faster pace of 51%. For comparison, Palantir's overall customer count in the third quarter of 2023 increased 34% year over year, while the commercial customer count increased by 45%. So, its AIP bootcamps are driving an acceleration in customer growth, but that's not where the good news ends. The customers that Palantir is landing through its boot camps have been signing bigger deals with the company following the initial agreement, as pointed out by management on the November 2024 earnings conference call. That's the reason why Palantir's total contract value (TCV) increased 33% year over year in Q3 2024, outpacing its actual revenue growth. This metric refers to "the total potential lifetime value of contracts entered into with, or awarded by, our customers at the time of contract execution," so its growth points toward an improvement in its revenue pipeline. Moreover, Palantir's net dollar retention rate increased by a solid 11 percentage points year over year to 118% in the last reported quarter. That's another sign of improved customer spending as this metric refers to the trailing-12-month revenue from its customers in a quarter to the trailing-12-month revenue from those same customers in the year-ago quarter. This combination of improved customer spending and the stronger growth in the customer base are the reasons why Palantir has reported a sharp increase in its margins in the past year. Palantir is operating in a market that's in its early phases of growth. The AI software platforms market was worth an estimated $28 billion in 2023. That figure is expected to jump to $153 billion in 2028 at a compound annual growth rate of 40.6%, according to IDC. So, there is a good chance that Palantir's growth could continue to accelerate over the next three years, which is probably why there has been a jump in Palantir's growth forecasts in recent months. However, one factor that may get in the way of Palantir delivering more upside is its valuation. The company has a price-to-earnings ratio of 400, which is extremely rich. The good part is that the forward earnings multiple of 154 points toward a big jump in its bottom line, which can be attributed to the 52% increase in Palantir's earnings for 2024. Analysts are expecting relatively slower earnings growth from Palantir in 2025 and 2026. However, there is a good chance that the company will be able to do better than that considering the fast-growing nature of the AI software platforms market and Palantir's fast-growing customer base, and that's why the possibility of more upside cannot be ruled out. So, growth-oriented investors can consider holding on to their Palantir positions as this AI stock may still have room to run higher.

Here's the Top S&P 500 Stock of 2024. History Says It Could Soar in 2025, but Wall Street Disagrees

Palantir Technologies (PLTR -2.01%) just had an incredible year. The company was not only added to the S&P 500 (^GSPC -0.43%) in 2024, but its 345% return made it the index's best-performing stock. That upside was driven by excitement about Palantir's artificial intelligence platform, which has positioned the company at the center of a fast-growing market. Importantly, history says Palantir could ride its momentum to strong returns in 2025, but most Wall Street analysts see substantial downside in the stock. Here are the important details. History says Palantir shares could soar in 2025 Shown in the chart are the best-performing S&P 500 stocks from each year of the past decade. The chart also shows the returns each stock generated in the next calendar year, illustrating the idea that the index's top performer tends to maintain its momentum. Data source: The Wall Street Journal, CNBC, YCharts. As shown, the top S&P 500 stock in each year of the past decade returned an average of 64% during the next calendar year. Additionally, only one time did the best stock in the index decline in the subsequent year. If we apply that information to Palantir, it puts the probability of a positive return in 2025 at 90%. It also suggests the likeliest outcome is 64% upside, which would carry Palantir stock above $125 per share. Of course, past performance is never a guarantee of future returns. How Palantir stock performs in 2025 will depend on the company's financial results and investor sentiment, which at some point will be influenced by valuation. Palantir is a leader in artificial intelligence software, but the stock is richly valued Palantir specializes in data analytics software. Its core products, Foundry and Gotham, enable businesses to integrate and make sense of complex information. The company also sells an artificial intelligence platform, AIP, that adds support for large language models to its core products, which lets users engage Foundry and Gotham with natural language. Forrester Research recently recognized Palantir as a leader in artificial intelligence and machine learning platforms, awarding AIP higher scores than similar tools from Alphabet-subsidiary Google. "Palantir is quietly becoming one of the largest players in this market," analysts commented. That's encouraging, because International Data Corporation estimates spending on AI platforms will increase at 40% annually through 2028. Palantir reported strong financial results in the third quarter, beating estimates on the top and bottom lines. Revenue increased 30% to $725 million, the fifth straight acceleration, and non-GAAP (generally accepted accounting principles) earnings rose 43% to $0.10 per diluted share. Particularly encouraging was the 40% sales growth among U.S. government clients, an area of the business that had been struggling. Management attributed its strong performance to demand for AIP. In short, Palantir has secured a strong presence in the AI platforms market, and spending in that market is projected to grow rapidly in the coming years. Unfortunately, the stock price has become disconnected from business fundamentals. Wall Street estimates Palantir's adjusted earnings will grow at 27% annually through 2025. That makes the current valuation of 225 times adjusted earnings look absurd. Not surprisingly, Wall Street is overwhelming bearish on Palantir. In fact, only six S&P 500 companies have a higher percentage of sell ratings, and Palantir's median 12-month target price of $39 per share implies nearly 50% downside from its current share price of $77. To that end, I think investors should look elsewhere for opportunities in 2025. Unless Wall Street is dramatically underestimating the company's future earnings, Palantir shares are likely headed for a sharp correction at some point in the future. At that point, prospective investors can reassess the situation and make a fresh decision.

Should You Forget Palantir and Buy These 2 Tech Stocks Instead? | The Motley Fool

Palantir Technologies (PLTR -0.58%) was the best-performing stock in the S&P 500 last year. The company began to see a lot of momentum with its artificial intelligence (AI) platform, as its focus on the workflow and application layers of AI led many companies to test its solution. It continues to have a big opportunity as it starts transitioning customers from proof of concept into production. That said, the strong run in Palantir's stock has left it with an astronomical valuation, trading at a forward price-to-sales ratio (P/S) of 40 times fiscal 2025 estimates for a company that just grew its revenue by 30% last quarter. That's more than double peak software-as-a-service (SaaS) multiples from a few years ago when SaaS stocks were growing in the mid-30% range. Meanwhile, Palantir executives, including its CEO, chairman, and chief technology officer, among others, have been aggressively selling shares the past few months. Let's look at two other stocks benefiting from AI trading at much cheaper valuations that investors can consider. Nvidia (NVDA 2.99%) has been one of the biggest AI beneficiaries, as the graphic processing units (GPUs) it designs have become the backbone of AI infrastructure. As a result, the company's revenue skyrocketed, including it producing 94% revenue growth last quarter. While its stock soared over the past few years, it nonetheless trades at attractive valuation with a forward price-to-earnings (P/E) ratio of under 31 based on 2025 analyst estimates, and a price/earnings-to-growth (PEG) ratio of approximately 0.96. A PEG ratio less than 1 is generally viewed as undervalued, but growth stocks will often have PEG ratios well above 1. Nvidia still has a big opportunity in front of it. As tech giants and AI start-ups race to build ever-better AI models, they need exponentially more computing power, and thus GPUs, to train these models on. While Meta Platforms' Llama 3 model was trained on 16,000 GPUs and xAI's Grok 3 was trained using 20,000 GPUs, Meta's Llama 4 model is being trained on 160,000 GPUs and xAI's Grok 4 is being trained on 200,000 GPUs. Meanwhile, there is talk of future AI models being trained using clusters of 1 million GPUs in the not too distant future. As the GPU leader, Nvidia is poised to continue to greatly benefit from this AI infrastructure buildout. Its CUDA software platform helped it establish a wide moat in the space, as long ago it was the first GPU company to introduce software to allow its chips to be programmed for tasks other than graphics rendering. As such, CUDA became the de facto platform on which developers learned to program these chips. With the introduction of a number of AI-specific microlibraries and developers tools, CUDA continues to be a huge differentiator for the company. While its valuation is much lower, the company has a big potential AI opportunity in front of it with its Agentforce solution. Salesforce is aiming to become the leader in agentic AI, which is widely considered the next step beyond generative AI. With agentic AI, AI agents will autonomously work within parameters to perform complex tasks on their own with little human oversight needed. While generative AI will tell you the best way to do something, agentic AI will just go out and do it itself. With its Agentforce solution, Salesforce says its AI agents can be used for a number of tasks across industries. For example, in retail its autonomous AI agents can learn from shoppers' behavior and preferences and act as a digital concierge to converse with them in a natural way. Meanwhile, it can be used for customer service in various industries to address billing complaints by reviewing past bills, identifying problems, and validating disputes. Agentforce is a usage-based product that costs $2 per conversation. On its early December earnings call, Salesforce said it had already closed 200 Agentforce deals since its launch in October and that it had thousands of potential deals in its pipeline. It forecast deploying 1 billion Agentforce AI agents by the end of fiscal 2026 (ending January 2026). Meanwhile, the company is innovating quickly, releasing Agentforce 2.0 following its fiscal third-quarter earnings report. New features with Agentforce 2.0 include a no-code platform to let users build their own tools, the ability to work outside of Salesforce's suite of products, and integration into its Slack product. While Salesforce has not been growing as quickly as Palantir, it nonetheless looks to be at the start of a huge AI opportunity and trades at a fraction of the valuation.

Prediction: 2 Stocks That Will Be Worth More Than Palantir by 2030 | The Motley Fool

There's no doubt about it. Palantir (PLTR -2.01%) was one of the biggest success stories in the stock market in 2024. With one day left in the calendar year, Palantir stock is up a whopping 349% for the year. Just about everything has gone right for the software stock. Its revenue growth has accelerated over the past several quarters, and its operating margin has also expanded. Along the way, the company has gained admission to the S&P 500 and the Nasdaq-100. The company seems to have transitioned from a niche data fusion company serving primarily government customers to one being rapidly embraced by commercial customers for both artificial intelligence (AI) and broader uses. However, along the way, Palantir's valuation has gotten significantly inflated. Even after a modest pullback, the stock now trades at a sky-high price-to-sales ratio of 72. That means that even if its profit was as high as its sales, it would still be twice as expensive as the S&P 500. That puts a lot of pressure on the stock to keep gaining from here, as the stock is likely to fall if its growth slows down. For investors, there are better stocks to buy over the next five years. Keep reading to see two of them. Axon Enterprise (AXON -1.65%) has also delivered a blockbuster 2024, with the stock up 134% through Dec. 30, and it's benefited from similar trends to Palantir. Like Palantir, Axon is also expected to benefit from policies from the incoming Trump administration. Axon is a law enforcement technology company that makes Taser stun guns and body cameras as well as a cloud software platform that helps law enforcement agencies manage things such as evidence and records. Investors expect spending on law enforcement activity to increase under Donald Trump because of proposals such as mass deportation, and Axon figures to be a winner. The stock gained 4% the day after the election and then jumped the following week on a strong beat-and-raise earnings report. At a market cap of $46 billion, Axon is much smaller than Palantir, which is currently worth $175 billion, but a lot can change over five years, and Axon is also tapping into the power of AI, showing its knack for innovation in an industry it now dominates. It even formed Axon AI in 2017, showing it was ahead of the technology curve. Earlier this year, it introduced Draft One, an AI-powered tool, that generates draft reports directly from body camera footage, saving officers valuable time. Investors should expect similar advances from Axon over the next five years, driving revenue and profit higher. Axon is expensive, trading at a price-to-sales ratio of 24.3, but that's still much cheaper than Palantir. With a clear path to growth and margin expansion, Axon still looks primed for solid growth over the next five years, while Palantir seems likely to face significant multiple compression. By 2030, I think Axon will be the more valuable company. Another longtime winner in the market is MercadoLibre (MELI -1.24%), a Latin American e-commerce and digital payments company. The stock is up nearly 6,000% since its 2009 IPO, having delivered consistently strong growth. MercadoLibre has followed a similar path to Amazon, developing a core business as a direct e-commerce retailer before layering on higher-margin businesses such as digital payments, a third-party marketplace, point-of-sale devices for brick-and-mortar merchants, advertising, and other features that include a delivery service, called MeracdoEnvios; asset management, called MercadoFondo; and a consumer lending business, called MercadoCredito. MercadoLibre's competitive advantages are evident in its rapid growth, its expanding margin, and the fact that it has withstood competition from giants like Amazon and Sea Limited's Shopee. Looking ahead, MercadoLibre still has a lot of whitespace opportunities in Latin America as it penetrates core markets including Brazil, Mexico, and Argentina and expands elsewhere in the region. The stock now has a market cap of $87.3 billion, making it a reasonable candidate to overtake Palantir over the next five years at half of Palantir's current valuation. MercadoLibre is also much cheaper, at a price-to-sales ratio of just 5, and price-to-earnings ratio of 61. Considering that its revenue jumped 35% in the third quarter, the stock has a lot of room for growth if it can maintain its momentum over the next five years.

Prediction: 2 Artificial Intelligence (AI) Stocks That Will Be Worth More Than Palantir by the End of 2025 | The Motley Fool

Palantir was a big winner in 2024, but 2025 might see these two dramatically outperform. Palantir Technologies (PLTR -3.72%) was one of the best-performing stocks of 2024. A strong start to the year for the artificial intelligence (AI)-powered enterprise software company went into overdrive in September. A strong earnings report and its addition to the S&P 500 that month stoked a ton of buying for the stock. The market has continued to push the stock higher, bringing the company's market cap above $187 billion, as of this writing. Palantir's financial results have been spectacular. But many analysts think the stock has gotten ahead of itself. Just three out of 22 Wall Street analysts covering the stock give it an overweight or buy rating. Moreover, none of them have a 12-month price target higher than its current stock price. Indeed, Palantir's stock valuation makes it tough to buy now. But investors looking to add some AI stocks to their portfolio have plenty of other options. And two other companies look far more attractive than the richly valued Palantir. In fact, I predict both will be worth more than Palantir by the end of 2025, as a result of strong relative price performance to 2024's big winner. There are two big shifts going on that increase the demand for Palo Alto Networks' (PANW -1.23%) cybersecurity services. More and more enterprises are shifting from on-premise storage and compute for their data and software needs to cloud computing. As they migrate to the cloud or adopt a hybrid approach, they increase the number of potential attack points for cyber criminals. Additionally, most workplaces have adopted a hybrid approach to working in the office versus working from home. Again, this opens more potential security vulnerabilities. Palo Alto offers security solutions across clients' networks (firewalls) in both hardware and software formats. It also offers solutions for the cloud and endpoint security, ensuring only authorized devices gain access to sensitive network data. Many cybersecurity providers rely on machine learning artificial intelligence to help detect cybersecurity threats early and close vulnerabilities. One of the biggest challenges for building an effective system based on machine learning is accessing valuable data. As a leader in the space, Palo Alto has a considerable data advantage over the competition. As such, its AI efforts pay off handsomely, as they work better than competitors. What's more, Palo Alto's capabilities make it more attractive to new customers, creating a virtuous cycle, whereby it gains access to more valuable data than its competitors. On top of that, it's important to consider the switching costs for existing customers. Few security analysts are going to risk their job to save a few bucks for their company on a competing product. Just the opposite, they're more likely to go back to Palo Alto Networks when their needs expand. Palo Alto has been expanding its offerings through bolt-on acquisitions over time, and it's seen considerable success cross-selling customers on new products. As the company shifts to more software-based solutions and increases its cross-selling to customers, its gross margin should continue to move higher over time. As such, investors should see profits climb considerably faster than revenue for the foreseeable future. Palo Alto's shares currently trade for an enterprise-value-to-revenue ratio of 14.6. That's a fair price to pay. And if it can maintain that multiple through fiscal 2025, the stock should climb around 14% based on analysts' estimates. With a market capitalization of $124 billion, as of this writing, that would put its value at about $142 billion at the end of 2025. That would require Palantir stock to drop about 24% from today's price to fall below Palo Alto's potential market cap. When it comes to semiconductors, just a few companies get most of the attention. Most people know the big GPU makers like Nvidia. But one company making critical components of AI chips like Nvidia's is Micron Technology (MU -1.32%). Micron supplies memory chips, including standard DRAM and NAND chips found in PCs and smartphones. It also makes chips called high-bandwidth memory (HBM), which manufacturers like Nvidia incorporate into their high-end GPUs. As a result, Micron has been a big beneficiary of the growing spending and development in artificial intelligence. Micron's data center revenue grew more than 400% year over year in its first quarter, which ended in November. The segment, led by its HBM chips, now accounts for more than 50% of Micron's total sales. Management is extremely optimistic about the potential for AI to transform its business. It sees the HBM market growing from $16 billion in 2024 to $100 billion by 2030. Considering just three companies, including Micron, make HBM chips, Micron is sure to see its fair share of that growth. The strength of the data center business can offset short-term weakness in the consumer segment. Management lowered its forecast for the second quarter due to customer inventory reductions from PC and smartphone suppliers. The consumer segment slowdown points to the biggest risk of investing in Micron: cyclicality. Micron manufactures its own chips in-house. That requires significant capital expenditures up front, but results in relatively stable growth in cost of goods as it expands production capacity. Micron's chips are practically interchangeable with its competitors', which makes its pricing commodity-like. In other words, when there's strong demand for Micron's chips, it sees more orders and better pricing while its cost of production remains relatively flat. When demand falls, it receives less revenue, but it's still paying the same amount, potentially resulting in negative returns on invested capital. It seems likely Micron will continue to see very high demand for its HBM chips in 2025, as several big tech companies have laid out plans to substantially grow their data center spending. That should more than offset weakness in the consumer segment, and analysts expect 39.6% revenue growth for the year. At an enterprise-value-to-revenue ratio of 3.7 as of this writing, shares look undervalued, despite the cyclicality risk. If shares expand their multiple to 4 over the next year, and analysts' estimates pan out, Micron would see its stock climb about 50% next year. That would put its market cap around $150 billion. A 20% drop in Palantir shares over the next year would put it below that number. Regardless of whether Micron or Palo Alto Networks end up being worth more than Palantir by the end of 2025, both look far more attractive than the highflier at today's prices.

400 Million More Reasons to Love Palantir Stock Right Now | The Motley Fool

Artificial intelligence (AI) stocks were the gift that kept on giving throughout 2024. While Nvidia and Tesla were scorching hot, there's one company that outperformed all of its peers in spectacular fashion. Shares of AI software developer Palantir Technologies (PLTR -2.40%) skyrocketed by 357% in 2024 -- handily topping the S&P 500, Nasdaq Composite, and every single other stock in the S&P 500 index. With 2024 coming to a close, I wanted to break down one last big update that Palantir recently shared with investors. Below, I'll dig into a new contract the company won and detail why this deal is so important for the long-term thesis surrounding Palantir's position in the AI realm. Palantir sells its software across commercial environments as well as the public sector. With regard to the government, Palantir's primary focus is on defense agencies. Throughout 2024, Palantir won a number of large-scale federal contracts as the military began to increase budget allocations toward AI-driven protocols. On one side of the equation, Palantir partnered with other private-sector leaders including Microsoft, Meta Platforms, and Amazon on defense-focused deals. With Microsoft, Palantir integrates its Artificial Intelligence Platform (AIP) with the Azure cloud infrastructure currently in place at the Department of Defense. Moreover, the company is also implementing AIP with Amazon Web Services (AWS) and the Anthropic platform across classified environments in defense agencies. On the other side of the equation, Palantir demonstrates an ability to win public-sector deals entirely on its own, without the help of its big tech cohorts. In September, Palantir won a deal with the Army Research Laboratory as part of the government's Project Maven initiative. This specific deal is worth up to $100 million over the course of five years, and came on the heels of Palantir winning a separate five-year deal worth up to $480 million with the Pentagon. The Project Maven umbrella has been successful in securing federal contracts for Palantir. Just last month, news broke that the Naval Information Warfare Center (NIWC) intends to award Palantir a multiyear contract worth almost $1 billion. Similar to its ties with Project Maven, Palantir recently extended its partnership with the Army Vantage program. Following a win with Army Vantage last December, Palantir signed another $400 million deal with the operation. Of note, the deal could be worth up to $600 million based on certain criteria and additional milestones. Army Vantage is a dedicated movement within the military that is specifically focused on investing in data analytics, machine learning, and AI. The graphs below bifurcate Palantir's revenue base across the commercial and public sectors. Through the first nine months of 2024, roughly 55% of Palantir's total revenue stemmed from the public sector. Moreover, as the graphs above indicate, the company's current revenue trajectory in the government segment is higher than its commercial business by a considerable margin. So while investors tend to hone in on Palantir's ability to navigate competition in the private sector, the trends above showcase how important the company's government business is, too. Despite the lumpy nature of government contracting, Palantir appears to have identified some intriguing ways to ensure continued growth in the public sector thanks to partnerships with big tech and consulting firms such as Booz Allen Hamilton. Furthermore, Palantir's ability to secure major deals on its own speaks volumes to how important the company has become within the Defense Department and related agencies. As an investor in Palantir, I am encouraged by the company's consistent penetration of the public sector and think even further acceleration is ahead as AI becomes a more prominent area in military operations.

Investors Are Piling Into Palantir, but Its AI Competitor Might Outperform It in 2025

Palantir has a strong argument for being the best AI software stock right now. However, it could easily lag a direct competitor in 2025. Palantir Technologies (PLTR -3.72%) has seemingly become the market leader in developing and deploying artificial intelligence (AI) software in the real world. After working with government agencies in its earlier years, Palantir is thriving in the commercial sector, especially after launching its AIP platform for AI applications. Its accelerating revenue growth and juicy profit margins have fueled tremendous investment returns of nearly 400% over the past year. That's why pointing you to C3.ai (AI -4.26%), another AI software stock, instead might seem counterintuitive. However, it makes sense when you consider all aspects of an investment, including the price you pay. Here is why C3.ai is poised to outperform Palantir stock in 2025. Palantir's excellence doesn't offset a ridiculous price tag I'm not here to argue against Palantir's fundamentals. It's a fantastic business that's gaining momentum on AI tailwinds. Revenue growth is accelerating as enterprises flock to Palantir's AIP platform. The company's U.S. commercial customer count grew an impressive 77% year over year in Q3 to 321. Palantir's software has a remarkable range, from assisting in military missions to running hospitals. The roughly 20,000 large businesses in the U.S. alone represent a tremendous market opportunity. Additionally, Palantir is growing profitably, evidenced by its consistently increasing Rule of 40 score. The Rule of 40 adds a company's percentage revenue growth to its free cash flow margin rate. Anything 40 or above is considered good, so Palantir's 68% in Q3 is stellar. But a company and its stock aren't the same. Palantir's stock has soared to bubble-like valuations by almost any metric. Its price-to-sales (P/S) ratio is over 74, and its forward price-to-earnings (P/E) ratio is over 216 today (its trailing P/E is 411). The business grew revenue by 30% year over year in Q3. Meanwhile, analysts estimate that Palantir will grow earnings by an average of 28% annually over the long term. These growth rates don't come close to justifying Palantir's current valuation, meaning the stock likely reflects at least several years of future growth. Buying at these levels will probably produce subpar results until the stock's valuation makes more sense. C3.ai is growing on AI tailwinds but falls short in key areas. No, C3.ai isn't on Palantir's level. The company is a direct competitor to Palantir. It also offers AI software applications to government agencies and enterprises for various applications. Interestingly enough, C3.ai is enjoying similar AI tailwinds and following a growth trajectory like Palantir's. Revenue grew by almost 29% in C3.ai's latest quarter, close to Palantir's: AI Operating Revenue (Quarterly YoY Growth) data by YCharts Where C3.ai falls short is the company's bottom line. Palantir is wonderfully profitable, generating $980 million in free cash flow over the past year on $2.6 billion in revenue (36% of revenue). The company is also consistently GAAP profitable and was added to the S&P 500 earlier this year. Meanwhile, C3.ai has burned over $58 million in cash over the past four quarters on $346 million in revenue. Even worse, its $274 million in trailing-12-month GAAP net losses are a gulf the business must close on, thanks mainly to high stock-based compensation amounting to nearly two-thirds of its revenue. C3.ai over Palantir? Why it's possible in 2025. Still, I like C3.ai over Palantir in 2025, despite its flaws. Why? Because it trades at a fraction of the valuation: AI PS Ratio data by YCharts Two similar companies are growing at comparable rates. Does profitability alone justify one trading at nearly five times the valuation of the other? More importantly, C3.ai's financials are improving. The company's cash burn bottomed out at over $200 million in early 2023 and has improved to just over $58 million over the past four quarters. Additionally, C3.ai has a healthy balance sheet with $730 million and zero debt. If the business generates cash flow in 2025 and shrinks its net losses, the market could recognize the improvement and reward C3.ai with a higher valuation. Still, even if the valuation remains unchanged, growing 30% will likely translate to solid investment returns. On the other hand, Palantir's stock price could fall if its steep valuation begins to crack due to disappointing earnings or shakiness in the broader market. Palantir is the better business and preferred stock when the valuation makes sense. But while Palantir trades on cloud nine, C3.ai is a sneaky contrarian stock idea for 2025 and is likely the better short-term pick.

The stock that won 2024

If it were a competition, there's one company that would easily take the trophy for 2024's stock market champion. Excitement around artificial intelligence and its use cases pushed shares of the once little-known software stock Palantir Technologies to its best year on record since debuting on the stock exchange in 2020. PLTR YTD mountain Shares this year Not only have shares popped 350% for a record year, but the company also breezed past a slew of milestones. The company earned a coveted position in the S & P 500 in September and officials joined the concentrated Nasdaq-100 index this month. It's year-to-date gain is the biggest of any current S & P 500 member with Vistra Corp. a distant second with a 263% gain. The shares fell 2% on Monday, helping to drag the broader market lower as investors took some profits on big 2024 winners. Since its founding in 2003, Palantir has earned a reputation for its data software and analytics that have helped it win key government and defense contracts. This month, shares gained after the company announced an extension of its artificial intelligence contract with the U.S. Army totaling up to $619 million . Drone maker Red Cat Holdings this month also revealed a partnership with Palantir. Many view Palantir's blowout year as only the beginning for the Denver-based company. Last month, Bank of America analyst Mariana Perez Mora called its push into government and commercial applications in the "early innings." She believes the company and CEO Alex Karp are "leading the modern Knudsen movement," referring to Bill Knudsen, an automotive industry expert renowned for building out aircraft production, which was seen as having an integral role in the United States' World War II victory. "PLTR has demonstrated their ability to digitize enterprises and battlespaces from finances to missile production," she wrote. "In a world where efficiency, innovation, safety, and speed are the most valuable assets, we see Palantir as the enabler and winner in this new era." To be sure, there are some doubters even after Palantir's breathtaking run. More than half of Wall Street analysts maintain a hold rating on the stock, with nearly a third retaining a sell or underweight rating, according to FactSet. Morgan Stanley analyst Keith Weiss dropped his rating on the stock from underweight and removed his price target in November as the firm reassesses its thesis. Despite signs that the company is "emerging as a platform of choice in this stage of the generative AI cycle," he believes the risk-reward looks unbalanced. In his downgrade to an underperform rating on Palantir last month, Jefferies analyst Brent Thill cited an "unsustainable valuation" at 38 times 2025 revenues. "PLTR will no longer have easy comps heading into Q4 and CY25, and we believe it will be more difficult to accelerate growth from here," he said.

Palantir vs. Salesforce: Which Is the Better AI Software Stock to Own in 2025? | The Motley Fool

Palantir has already begun to see the benefits from AI, with its AI platform helping its revenue accelerate. This led to an incredible performance in its stock price in 2024. Salesforce, meanwhile, has just recently introduced its important AI solution. Let's see which stock looks poised to outperform in 2025. When it comes to AI software, Palantir is the early leader. The company took its early success with the government, where its analytics platform is used for mission-critical tasks such as fighting terrorism, and integrated AI models into its platform. This helped essentially transform the company's platform into an AI operating system that is able to help customers make data-driven decisions across a multitude of use cases in various industries. Eschewing creating its own AI models, Palantir's focus has been on the application and workflow layers, where its platform can help with logic and functionality to provide the actions needed to complete tasks. It then rigorously tests these custom solutions through tools within its platform to make sure they can be applied to real-world applications. Palantir's AI platform led to strong growth within the commercial sector. Last quarter, its U.S. commercial revenue climbed 54% to $179 million, while its U.S. commercial customer count jumped 77% year over year. Overall revenue rose 30% to $726 million. However, this could really just be the start of Palantir's success, as much of its early AI success has been through proof-of-concept (prototype) work. Taking customers from proof of concept to real-life applications (production), could be a huge growth driver moving forward. While Palantir got its start as an analytics platform for the government, Salesforce established itself as the leader in customer relationship management (CRM), where its platform acts as a centralized hub to store customer information all in one place. Through its acquisitions of Mulesoft, Tableau, and Slack, it has moved into the areas of automation, analytics, and employee communication. Salesforce, meanwhile, is looking to become the leader in agentic AI. This is often viewed as the next stage of AI, where AI agents can act autonomously without human intervention to help make decisions and take actions to achieve a specific goal. On this end, the company recently introduced Agentforce, its autonomous AI agents. These agents can be built and used for various cases. The company uses an example in the financial industry, where Agentforce can research discussion points before a meeting, such as a company's exposure to international markets, or even check power-of-attorney status to ensure proper compliance and then direct any communications to properly licensed supervisors. In the healthcare industry, for example, it can review benefit coverage and approve care requests. Agentforce was launched just in October, but the company said on its early December earnings call that it already closed 200 Agentforce deals and had thousands of potential deals in its pipeline. Agentforce is a consumption product that costs $2 per conversation, and the company sees the potential for having 1 million Agentforce AI agents deployed by the end of fiscal 2026 (ending January 2026). As such, this is a huge opportunity for the company over the next few years. Palantir is currently the much faster growing of the two companies, with revenue growth of 30% last quarter compared to 8% for Salesforce. Salesforce forecast similar 7% to 9% revenue growth for Q4, while Palantir guided for 27% revenue growth. If their AI solutions take off, both companies have good potential upside to these forecasts. From a valuation standpoint, Salesforce is the much cheaper stock. It trades at a forward price-to-sales (P/S) multiple of under 8 times next year's estimates, while Palantir trades at nearly a 51 times multiple. That is an extraordinary valuation for a company currently growing its revenue by 30%, and is more than double peak historic software-as-a-service (SaaS) multiples. While Palantir has a potential huge opportunity in front of it, a lot of future growth is priced into the stock and there is not much room for error. As such, for 2025 I prefer the safer and much cheaper Salesforce, which looks like it has its own big opportunity in front of it with Agentforce.

Better AI Stock: Nvidia vs. Palantir? | The Motley Fool

Nvidia needs little introduction at this point. The chip stock has come to dominate the market for data center GPUs (graphics processing units) in the AI boom, which has driven its stock price up roughly 10 times since the start of 2024. Palantir, meanwhile, has emerged as the biggest winner in software from AI as its experience with deep data mining, known as data fusion, has paid off, especially since the launch of its artificial intelligence platform (AIP) last year. As the chart below shows, both stocks have soared this year. So, which is the better buy today? Let's get into the details on what each stock has to offer. Nvidia has established itself as the leading chip design company, thanks to its prowess in AI and its investments in areas like its CUDA software library, which give it a competitive advantage. As a result of its wide lead in AI-focused components like the new Blackwell platform, Nvidia currently generates massive profit margins with a generally accepted accounting principles (GAAP) operating margin of 62% in the third quarter. The company has built an all-star culture focused on innovation, and it seems likely to remain ahead of the competition on AI chips. It depends on foundries like Taiwan Semiconductor Manufacturing Company for manufacturing and is vulnerable to cyclicality and broader concerns about a bubble in AI. The semiconductor industry is notoriously cyclical and prices and inventory levels can change quickly. Therefore, Nvidia's greatest risk is likely a change in industry dynamics that would threaten its growth rather than a competitive threat. Palantir got its start serving U.S. intelligence agencies after 9/11, helping them connect data points to find threats they otherwise would have missed. Palantir has since expanded its product suite to specialize in a wide range of business needs, including cryptocurrency, data protection, and the prevention of money laundering. Its principal software platforms include Gotham, Foundry, Apollo, and Artificial Intelligence Platform (AIP). Gotham and Foundry are focused on taking massive amounts of information and making it into a useful dataset. Apollo is a layer for commercial customers that allows them to run their software in nearly any environment, and AIP works with Gotham and Foundry to use machine learning to accelerate insights. Palantir has a relatively small number of high-paying customers, meaning it deals in large contracts. The size and complexity of its contracts mean the company faces relatively little competition from other software companies. Instead, it sees the internal software development efforts of its customers as its biggest competitor. Like Nvidia, Palantir is also at risk of a sectorwide pullback, though its competitive position seems resilient, given the specialized nature of its business. Both Nvidia and Palantir have delivered impressive results, but one company is clearly growing faster than the other. Nvidia reported 94% revenue growth in the third quarter to $35.1 billion, with $19.3 billion in net income, up 109% from the year before. Palantir, on the other hand, reported 30% revenue growth to $726 million with strong results in the U.S. and its commercial segment. Net income jumped 103% to $149.3 million as its margins rapidly scaled up. Palantir's explosive growth this year has come largely from multiple expansions. As a result, the stock is trading at a sky-high valuation. Palantir now trades at a price-to-sales ratio of 75 and a price-to-earnings ratio of 411 based on GAAP earnings. Nvidia stock looks more reasonable. It currently trades at a price-to-sales ratio of 31 and a price-to-earnings ratio of 55. Both of these companies have a lot to offer investors, especially if demand for AI continues to grow, but looking at both stocks holistically, Nvidia is the better buy. Palantir's business is certainly intriguing. It's demonstrated its value to customers and seems to have a meaningful competitive advantage. However, its valuation presents a significant risk as the stock could easily plunge if it misses expectations. Nvidia, on the other hand, also looks poised for similar growth but with less downside risk.