We recently published a list of 10 AI Stocks Wall Street is Talking About. In this article, we are going to take a look at where Palantir Technologies Inc (NASDAQ:PLTR) stands against other AI stocks Wall Street is talking about.
Defiance ETFs CEO and CIO Sylvia Jablonski said in a recent program on Bloomberg that there are trillions of dollars of cash waiting on the sidelines ready to be invested in AI amid demand that is at an all-time high.
“There’s a biggest wealth transfer of our generation happening as we speak. And you know, Gen Z, you know, Gen Z, Millennial, Gen X kind of, you know, the younger traders are, this is where they’re allocating their funds to. And, you know, retail has definitely spoken, and institutions have definitely spoken, and they’re looking for that, that fourth industrial revolution allocation.”
Sylvia also talked about the relationship between quantum computing and AI and explained how this technology would improve AI systems:
“So chatbot AI is, you know, kind of version one. Quantum is taking everything to the next level. So you need quantum in order for it to be efficient. You need to process that data quickly. It will help, you know, essentially health care, cryptography, aerospace and defense, you know, blockchain technology. Anything you can think of will be better, too, with quantum supercomputing power.”
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For this article, we chose 10 AI stocks that are currently buzzing on the back of latest news and analyst ratings. With each stock we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A software engineer intently typing code into a laptop with multiple screens in an office.
Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
James Demmert from Main Street Research recently said during a program on Schwab Network that Palantir Technologies Inc (NASDAQ:PLTR) stock can keep going higher. The analyst mentioned the possible growth catalysts for the stock beyond just the government contracts:
“They’ve already done their work on the government side of it, and now they’re starting to expand the commercial side of their business. That’s where I see a bigger growth area moving forward. …We have to think about Palantir Technologies Inc (NASDAQ:PLTR) as a company that helps enterprises, not just the U.S. government, which is obviously a huge and very consistent contract, particularly with this administration. They’re delving into the commercial sector—54% of their sales came from commercial, which was a huge number back in November when they reported. Industries like healthcare are embracing Palantir for disease tracking, and in the industrial sector, they’re using Palantir Technologies Inc (NASDAQ:PLTR) for applications like supply chain management.”
What makes Palantir Technologies Inc (NYSE:PLTR) one of the top AI stocks? Its technologies are actually solving the problems of businesses. Palantir’s data technology Ontology is solving the famous hallucination problem for AI systems, thanks to the company’s years of experience with military and defense systems. Earlier this year at an event with customers, Palantir Technologies Inc (NYSE:PLTR) shared some specifics on how its customers are being able to reduce costs and increase profits due to its artificial intelligence platform (AIP) that was launched about a year ago.
Airbus accelerated A350 production by 33%, BP reduced costs per barrel by 60%, and Jacobs Connect cut power usage by 30%. Panasonic decreased waste by 12%, ESI Group sped up ERP harmonization by 70%, and PG&E reduced transformer ignitions by 65%. Eaton boosted productivity by 25%, while Tyson Foods achieved $200 million in cost savings.
However, Palantir’s revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NYSE:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NYSE:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price.
Fidelity Growth Strategies Fund stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q3 2024 investor letter:
“Untimely ownership of Palantir Technologies Inc. (NASDAQ:PLTR) (+47%) also hurt the fund’s relative result. This software and services firm, which operates in both government and commercial segments, saw strong growth during the quarter, largely driven by its “AIP” – or Artificial Intelligence Platform – offering. In early August, the company reported Q2 financial results that mostly met somewhat lofty expectations. We established a sizable holding in Palantir Technologies during the quarter, and at quarter end it was the second-largest position and a slight overweight.”
Overall, PLTR ranks 10th on our list of AI stocks Wall Street is talking about. While we acknowledge the potential of PLTR, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.