Over the past year, investors have taken a keen interest in artificial intelligence (AI) stocks. As technology transforms the technology industry, game-changing productivity capabilities fuel optimism across the sector.
Perhaps no stock is better than this prospect. Palantir (NYSE: PLTR ). While the company has long relied on AI to power its applications, its use of generative AI could change its future. Here’s how
Palantir and Generative AI
Palantir is known for generating analytical insights from AI. It began in the national defense realm, and many credited its Gotham platform with helping the CIA hunt for Osama bin Laden.
However, with a limited number of clients from the government, Palantir has built the foundry to apply its analytics capabilities to the commercial sector, which has increased its addressable market.
Still, it’s likely its Artificial Intelligence Platform (AIP) that will unlock much of the company’s growth potential. AIP applies creative AI capabilities using enterprise data, action and logic to deliver insights.
The company demonstrated the power of AIP through its Bootcamp, its five-day workshops that help potential clients explore AI use cases.
Through the bootcamp, Palantir delivered workflows using customer data, a process that previously took one to three months. This dramatically shortened time frame amounts to massive productivity gains. One potential client spoke of having “100s of use cases,” while another claimed “endless solutions” from the platform. Ultimately, this could provide Palantir with substantially increased business.
By the end of 2023, Palantir had delivered more than 560 bootcamps within 465 organizations.
Where Palantir Stands Financially
AIP benefits do not seem to have provided the income growth that might have been expected. Its 2023 revenue of $2.2 billion a year grew just 17 percent. Also, the $2.66 billion revenue forecast for 2024 equates to 19 percent revenue growth if the forecast holds.
Still, the company has now made a GAAP profit for five quarters, and net income attributable to shareholders of $210 million is well above a loss of $374 million in the prior year. In addition, analysts forecast a 32% increase in net income in 2024, which should help boost the stock price.
Admittedly, he’s already seen some gains, as the stock is up 175 percent over the past year. This increase has pushed the forward P/E ratio to around 70.
Nevertheless, as the benefits of AIP become better known, it is likely that more organizations and governments will take advantage of the productivity benefits it offers. This trend could make Palantir stock worth its premium price.
Consider Palantir.
The power of Palantir’s generative AI tool probably makes it a must-have stock. Admittedly, given the strength of its technology, revenue growth looks slow. Also, investors have taken notice and bid for its shares to a higher price.
However, given the mass productivity gains Palantir’s software offers, it should give the company tremendous pricing power. Over time, this should bolster income and revenue levels, sustaining rapid growth and making it one of the most important and sought-after stocks of artificial intelligence.
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Will Haley holds positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a Disclosure Policy.
Palantir is now my top artificial intelligence (AI) stock to buy. Here’s why. Originally published by The Motley Fool.