The buzz around artificial intelligence (AI) investments continues to grow, and if you’re looking to stay ahead, you’ll want to keep an eye on the stocks driving this trend. We recently highlighted 10 trending AI stocks to watch for the rest of 2024, and ranking 10th on our list is Palantir Technologies Inc. (NYSE: PLTR). Let’s dive deeper into what makes Palantir a noteworthy stock in the current market landscape.
In a recent CNBC interview, Chris Hyzy, the Chief Investment Officer of Merrill and Bank of America Private Bank, shared insights about the current market rally, commenting on the significant “momentum” behind it. According to Hyzy, understanding this “wedge” in the market is essential to gauge the depth of optimism. He noted, “The biggest wedge that was in the market last year and in 2022 was inflation. That’s beginning to go away. It’s almost to the fact that no one’s is talking about whether or not we are going to have inflation that’s worrisome.”
Hyzy pointed out that two critical tailwinds for the market are the Federal Reserve easing its fiscal policies and China “joining the party.” He also encouraged looking beyond the traditional hard landing vs. soft landing debate, suggesting that many more scenarios need consideration. “We have a lot of components of a soft landing,” he stated, expressing optimism about potential profit revisions positively impacting the market.
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Palantir Technologies Inc (NYSE: PLTR)
Number of Hedge Fund Investors: 44
Wedbush analyst Dan Ives praised Palantir’s recent multi-year, multimillion-dollar extension of its enterprise deal with APA Corporation—a move highlighting Palantir’s potential in the AI landscape. Ives referred to the company as the “Messi of AI,” indicating it’s well-positioned to expand its pipeline and deal flow while tackling critical challenges across various industries. “We believe the Messi of AI Palantir is in a prime spot to continue expanding its pipeline/deal flow while providing more use cases coming forward to address critical problems across industries and empower data-driven decision-making with a comprehensive suite of AI/ML solutions,” he noted.
Wedbush maintained its Outperform rating for Palantir, raising its 12-month price target from $38 to $45. According to Ives, demand from both new and existing customers remains strong, suggesting that organizations are increasingly utilizing Palantir’s technology to drive efficiencies through AI, which is a significant contributor to the company’s momentum.
What sets Palantir apart is its focus on solving real business problems. Its data technology, named Ontology, addresses the “hallucination” issues common in many AI systems due to the company’s extensive experience in military and defense contexts. At a recent event, Palantir showcased specific examples of how its AI platform (launched only a year ago) has enabled customers to significantly lower costs and improve efficiency. Notable successes include:
- Airbus ramping up A350 production by 33%
- BP cutting costs per barrel by 60%
- Jacobs Connect reducing power usage by 30%
- Panasonic lowering waste by 12%
- ESI Group accelerating ERP harmonization by 70%
- PG&E decreasing transformer ignitions by 65%
- Eaton increasing productivity by 25%
- Tyson Foods generating $200 million in cost savings
Despite these successes, Palantir’s stock valuation has raised concerns, trading at around 21.2 times its next 12 months’ revenue. For fiscal year 2024, the company anticipates a 24% year-over-year revenue growth, expecting to reach $2.746 billion, with an adjusted operating income reflecting a 35.3% margin. However, projections indicate a slowdown in revenue growth over the next two years, moving towards an anticipated $4 billion by fiscal 2026.
In an investor letter, Carillon Scout Mid Cap Fund noted, “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.”
While Palantir Technologies Inc (NYSE: PLTR) securely holds the 10th spot in our trending AI stocks list, many believe AI investments can yield even higher returns in a shorter timeframe. If you’re exploring AI stocks that may potentially outperform PLTR and are trading at less than five times their earnings, be sure to check out our report on the cheapest AI stock available.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and Jim Cramer is Recommending These Stocks.
Disclosure: None. This article was originally published at Insider Monkey.
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