We recently compiled a list of the 7 Unstoppable Artificial Intelligence (AI) Stocks To Buy Now. In this article, we are going to take a look at where Palantir Technologies Inc. (NYSE:PLTR) stands against the other unstoppable AI stocks.
Is Predictive AI Taking Over GenAI?
Generative AI is taking the world by storm. This groundbreaking technology is capable of creating new content, such as text, images, and even music, based on the patterns it learns from existing data. The impact of this advancement in AI on businesses has been profound, with businesses using it to automate tasks, improve efficiency, and generate innovative solutions through personalized content.
While there are still challenges, GenAI’s potential is undeniable. AI companies have rolled out GenAI platforms, integrating large language models in them, that are a click away from the general public’s access. We talked about this earlier in our article about the 10 Best Small Cap AI Stocks to Buy According to Short Sellers. Here’s an excerpt from it:
“Large language models are a type of AI that uses deep learning techniques and massive datasets to understand, generate, and predict human language. They’re trained for all of this through statistical relationships from vast amounts of text. The reason why they became so popular in such a short time is because they can be fine-tuned for specific tasks or understand language better through specific prompts. LLMs like Gemini and ChatGPT-4 are Multimodal AI platforms that allow processing and generating multiple types of data simultaneously, such as text, audio, and visual inputs.”
GenAI has been popular recently due to advancements that have brought us models like ChatGPT-4, but predictive AI (or enterprise machine learning) has been prevalent in the business world for a longer period. It’s been used extensively for tasks like fraud detection, customer churn prediction, and market analysis. GenAI excels at creating new content, but predictive AI is better suited for tasks that involve forecasting future trends or predicting outcomes based on historical data.
Mature organizations with streamlined processes use predictive AI as it helps deliver high returns and improve the customer experience. Forbes reported that UPS saves $35 million annually by optimizing package delivery planning. A medium-sized bank could save $16 million annually by predicting fraudulent transactions. A marketing campaign could increase profit 5x by predicting consumer behavior.
GenAI spending was less than 7% of predictive AI last year. However, predictive AI’s potential remains largely untapped due to challenges in operationalization. It can operate autonomously, while GenAI often requires human oversight. It is also cheaper and has a smaller footprint than the latter. The global predictive AI market is expected to grow from $14.9 billion in 2023 to $108 billion by 2033, with a CAGR of 21.9% from 2024 to 2033, according to a report published by market.us.
Google AI’s investment of $100 billion in responsible AI initiatives, focusing on areas like healthcare, climate change, and cybersecurity, indicates this sector’s importance and potential. Similarly, SoftBank’s $3.5 billion fund for predictive AI startups and Sequoia Capital’s substantial investment in PreCog are also examples of this. In 2023, the Large Enterprises segment captured more than a 65% share in the Predictive AI market.
Predictive AI is used for large-scale operations, learning from data to predict outcomes and behaviors, and guiding millions of daily operational decisions. Such use cases are further a testament to how artificial intelligence is now an integral part of major industries of the world, whether directly or indirectly.
Methodology
To compile our list, we sifted through ETFs, online rankings, and internet lists to compile a list of 15 AI stocks. We then selected the 7 stocks that were the most popular among elite hedge funds and had gained at least 30% year to date. The stocks are ranked in ascending order of the year-to-date performance, as of September 4.
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 manipulating a vast network of code on virtual monitors.
Palantir Technologies Inc. (NYSE:PLTR)
Number of Hedge Fund Holders: 44
Performance (Year-to-Date) as of September 4: 77.69%
Palantir Technologies Inc. (NYSE:PLTR) is a company that specializes in software platforms for big data analytics, which means that it uses AI to help other companies make better, data-driven decisions, by understanding, visualizing, and analyzing large amounts of complex data.
The company specializes in deploying enterprise AI in production. The expertise and focus position it uniquely to capitalize on the $600 billion AI opportunity. Last quarter, it signed 27 deals worth more than $10 million.
In June, Tampa General signed a 7-year expansion to use the company’s AI platform (AIP) for care coordination, resulting in a 30% reduction in patient length of stay. Panasonic Energy of North America signed a three-year expansion to use AIP across finance, quality control, and manufacturing operations. AARP is leveraging AIP to deliver personalized experiences to its 29 million monthly visitors.
In August, it partnered with Wendy’s to use AI for supply chain optimization and partnered with Microsoft to bring AI to US national security, integrating Microsoft’s Azure OpenAI Service into Palantir’s AI Platform. Later, it also partnered with Sompo, a Brazilian insurer.
In its 27% year-over-year improvement for Q2 2024, the revenue generated was $678.13 million, with $0.09 in earnings per share. Both of these numbers came out higher than Street estimates for the quarter.
A venture capital firm, Sequoia, noted that the revenue expectations from the AI ecosystem’s infrastructure build-out for Palantir Technologies Inc. (NYSE:PLTR) have grown from $200 billion to $600 billion per year in just nine months. Such growth is suggestive of a promising future, making this AI stock one of the top ones. 44 hedge funds are long in it as of June 30. The largest shareholder is Renaissance Technologies, with a position of $1,000,922,777.
Carillon Scout Mid Cap Fund stated the following regarding Palantir Technologies Inc. (NYSE:PLTR) in its first quarter 2024 investor letter:
“The top contributor to return for the quarter was Palantir Technologies Inc. (NYSE:PLTR). Sentiment improved on Palantir after it reported stronger than expected commercial customer revenue and free cash flow. U.S. commercial growth was especially encouraging, as U.S. commercial revenue was up by a large percentage year over year for the fourth quarter and U.S. commercial customer count grew nearly as much. We expect Palantir to become one of the premier artificial intelligence (AI) software providers, built on its Foundry and AIP platforms.”
Overall PLTR ranks 5th on our list of the unstoppable AI stocks to buy. While we acknowledge the growth potential of PLTR as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. 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.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.
Hedge Fund Resource Center