Which Of These Artificial Intelligence Stocks Is On Top Of Your List?
Artificial intelligence stocks have been picking up some momentum in the stock market recently. To many, artificial intelligence, or AI is a buzzword increasingly used by companies around the world. This is understandable as many companies want to position themselves as developers of cutting-edge technologies. And demand for artificial intelligence services in a new digital era is stronger than ever. With more corporations utilizing big data to optimize the performance of their operations, investors have also increasingly been on the lookout for top artificial intelligence stocks to buy.
Many companies use AI to improve their products and services. Perhaps you may not realize it, but you could be using AI on a daily basis. Big Tech like Google, (NASDAQ: GOOGL) uses AI to filter out the spam for its Gmail users. Amazon (NASDAQ: AMZN) uses AI to recommend products to customers. The list here is endless. With the market already large and growing quickly, it makes sense to put up a list of artificial intelligence stocks to buy to profit from the megatrend. According to estimates from IDC, total spending on AI systems will reach $97.9 billion in 2023, up from $37.5 billion in 2019.
All this has and continues to contribute to the meteoric growth of the AI space in recent years. Tech stocks may be under pressure in the stock market today. But there’s no question companies continue to benefit dramatically from AI. Collectively, this has paved the way for AI providers like C3.ai (NYSE: AI) and Palantir Technologies (NYSE: PLTR) to thrive with the rise of this secular theme. As more companies continue to employ AI technologies, how do these two stack up against each other?
Software company C3.ai describes itself as “the world’s largest enterprise AI production footprint”. So, what exactly does it do? The company’s software platform is used for developing, deploying, and operating large-scale AI and predictive analytics applications, among others.
From customer relationship management to inventory optimization, many corporations are utilizing the company’s AI services to benefit their operations. It’s worth pointing out that C3.ai counts tech giant Microsoft (NASDAQ: MSFT) as one of its shareholders. As promising as C3.ai’s offerings are, the company’s stock price hasn’t been living up to many investors’ expectations.
Since skyrocketing on its first day of public debut, AI stock has dropped more than 50% from its all-time highs. For investors looking to jump on the AI bandwagon, could this be an opportunity to get into the stock? No one can predict if AI stock will recover in the coming few months or continue its downtrend. However, with so much potential surrounding the AI space, would you say that AI stock is trading at a reasonable valuation right now?
C3.ai Is The Only Enterprise AI Software Pure Play
Like many companies, C3.ai has had a challenging 2020. Thus, it had to cut budgets and scale down new initiatives to conserve cash. It’s no secret that AI has the potential to change the way businesses operate. Many of the leading tech firms already use AI to a certain degree. But the thing is, not all companies have the same capabilities as a large tech firm that could deploy their own AI systems. And this is where C3.ai can fill in the gap and gain market shares.
From the company’s fiscal third quarter ended January 31, revenue came in 19% higher to $49.1 million, beating the consensus estimate of $47.3 million in sales. While the revenue growth isn’t what many were hoping for, many analysts believe that the long-term bullish case for the company remains intact. With a stronger economic recovery underway, there is a good chance for AI stock to rebound as the pandemic slowly gets under control. As C3.ai continues to grow its footprint among enterprise and government customers, would buying AI stock now be a good idea?
Palantir Technologies (PLTR)
Palantir Technologies is a tech company that has been in the spotlight since it went public last September. For the uninitiated, the software giant provides big data analytical services for massive clients. The company’s two platforms- Foundry and Gotham, are built to support AI. Both of these products allow clients to integrate massive datasets, creating the input needed to train AI algorithms. Simply put, Palantir allows its clients to draw insights from enormous amounts of data without ever compromising security.
The company managed to secure deals from various U.S. government agencies. They include the Central Intelligence Agency, the Defense Department, and Internal Revenue Service. Across the Atlantic, the U.K. National Health Service is also a client.
You can see the breadth of Palantir’s analytics services. Whether it’s locating bombs, looking for tax frauds, or managing a pandemic, Palantir has ways to contribute. Given its clientele, it is no surprise that investors are watching PLTR stock closely.
Strategic Partnerships Signal Opportunities For PLTR Stock
Apart from working with major government agencies across the globe, Palantir also counts IBM (NYSE: IBM), and BP (NYSE: BP) as its clients, just to name a few. Palantir’s strong relationship with government agencies in major markets makes it one of the most compelling investments in the market.
In early April, the company announced yet another contract win. In detail, Palantir will provide the National Nuclear Security Administration’s Office of Safety, Infrastructure, and Operations with a platform for effective knowledge management and data-driven decision-making. The agreement is worth up to $89.9 million for a duration of up to 5 years. The success of these projects would no doubt strengthen the company’s outlook.
From its fiscal year 2020, government customers accounted for more than half of Palantir’s total revenue. Revenue came in 47% higher year over year to $1.1 billion in fiscal 2020. The good thing about having government agencies as their clients is the longer tenures. Many of these clients could also be expected to renew their contracts when they come due. Should that happen, it could prove to be a major growth driver for PLTR stock.
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If you believe artificial intelligence is the next great growth frontier, both C3.ai and Palantir appear to be potential solid investments for long-term investors. Think about just how crucial AI is to companies. If you take away the AI capabilities from corporations, their profitability would plummet.
C3.ai is poised to be the market leader in the AI space with its niche position as the enterprise AI software pure play. Although AI stock has lost significant value, there’s no need to write it off yet. In fact, some investors would take the opportunity to buy AI stock as it is now trading at a more reasonable value.
On the flip side, Palantir is noteworthy for its strong business relationships with government agencies. If you believe that partnerships with government agencies are likely to be sticky and more lucrative in the long term, then PLTR stock may be the better bet.