When investors think of artificial intelligence (AI) stocks, names like these Palantir Technologies (PLTR -1.27%) And C3.ai (AI -1.97%) usually come to mind. And well they should. These big companies have been around for a while now and have largely ushered in the era of AI. Smaller, smaller players, eg BigBear.ai (BBAI -3.38%)did not
As experienced investors can attest, though, the smaller and smaller a promising company is, the closer you are to “getting in on the ground floor.”
It’s a pivot that raises a question for investors currently considering a new position in BigBear.ai. That is, could a $20,000 investment in this stock now be worth a million (or more) dollars down the road?
The answer is yes – it’s not out of the realm of possibility. That’s a “yes,” however, it comes with an important footnote.
BigBear.ai is similar but also different.
In case you’re not familiar, BigBear.ai is not unlike big competitors C3.ai and Palantir Technologies. All three companies provide platforms aimed at helping businesses and institutions turn large amounts of digital data into actionable information. You may know this science by its more common name – artificial intelligence.
BigBear.ai is distinctly different from other names in the AI business, though, in a few ways.
One of those ways is its size (actually, its lack of size). BigBear.ai did just $155 million worth of business last year. That’s far less than Palantir’s $2.2 billion and C3.ai’s top line of about $300 million for the past four reported quarters. In that regard, while C3.ai and Palantir sport market caps of $3.5 billion and $55 billion (respectively), BigBear.ai is relatively small, with a market capitalization of only around $500 million.
Although small, it can have advantages. This is another important differentiating factor of this company. Smaller companies are faster, faster-moving, and more capable of meeting the special needs of potential customers. For example, late last year, BigBear.ai unveiled technology that makes the computer-aided engineering software AutoCAD more powerful and allows it to simulate how a particular How the design should work if and when it is implemented.
Investing in BigBear.ai comes with risks.
While agility has its obvious ups and downs, so does BigBear.ai’s scale. does not enjoy
In some respects, its small lineup of offerings is so narrowly focused that it may not have much value outside of the company’s core competencies. These are government/defense, manufacturing and warehousing, and healthcare management solutions. Therefore, instead of developing a new platform, it recently chose to enter the vision AI market (facial recognition, baggage screening, etc.) by acquiring a niche company called Pangiam for $70 million. . A large AI organization may be able to build something similar at a lower cost.
In the same vein, potential customers are reluctant to do business with a smaller AI solution provider when the big companies are out. Smaller companies also produce less consistent results. Underpinning this idea is the fact that last year’s top line didn’t grow at all. While this year’s revenue is expected to grow at a pace of more than 30%, analysts expect BigBear.ai’s sales growth to slow to less than 13% next year.
BBAI Revenue (Quarterly) Data via YCharts
That kind of inconsistency can make it difficult for shareholders to stick with the stock when the underlying company’s future starts to look a little rocky.
Nevertheless, there is reason for cautious optimism here.
Weighing the Real Risks and Potential Rewards of Big Bear Stocks
As far as AI has come in just the last few years, it has so far only scratched the surface of its potential. Precedence Research believes that the worldwide AI industry is poised to grow at an annual rate of 19% through 2032.
The numbers are even more promising when talking about the software sliver of the artificial intelligence market (where BigBear.ai operates). Precedence expects this business to grow at a compound annual rate of 23% through 2032. If BigBear.ai’s hyper-focused solutions are what enterprises are willing to pay for — once they finally figure out what they need — this small company has more than its fair share of growth. can win
But turning $20,000 worth of BigBear.ai stock into a million dollars or more? Never say never, but it’s a streak to be sure. That would require at least a 5,000% return on your investment!
Oh, it’s happened before, but only by major companies apple And Amazon who were able to pursue a brilliant idea for years before any serious competitor stepped in. Both these monster-sized companies operate in businesses with no revenue cap on the horizon. This is in contrast to the artificial intelligence industry, which has a clear limit to size, even if it takes years to reach that limit. BigBear.ai already has bigger — and in some ways better — competition. These competitors simply won’t let this small company gain market share without eventually pulling back.
In other words, if you’ve got an extra $20,000 on hand you might really want to turn to a seven-figure stash, there are better as well as lower-risk choices to take a shot at.
Still, if you’ve got a small fraction of the value of your overall portfolio and are willing to take reasonable risk, you could certainly do worse than BigBear.ai.
John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. James Brumley has no positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple and Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has a Disclosure Policy.