Many experts believe that the latest advances in artificial intelligence (AI) will have a profound impact on the technology and business landscape. These advanced systems can generate original content, streamline time-consuming processes, and automate procedures, all with a few simple commands. This promises to increase productivity and save money, prompting companies to rapidly adopt next-generation algorithms.
One of the most obvious beneficiaries of this trend is Nvidia (NASDAQ:NVDA). From the company graphics processing units (GPUs) Companies must provide the computing power needed to process AI training and inference. However, the investment community is starting to look beyond the first phase of AI adoption (hardware) to focus on what comes next, which will invariably be AI-infused software. Generative AI software sales could soar up to 18,647% to $280 billion by 2032, according to Bloomberg Intelligence.
While there is no doubt that Nvidia will continue to thrive on its early adoption of AIanother company has decades of experience in the field and is poised to capitalize on the beginning of the tidal wave of AI software adoption.
A pioneer of AI
Palantir Technologies (NYSE:PLTR) Palantir emerged as an early leader in the AI ​​revolution more than two decades ago. The company has partnered with U.S. government agencies and allies to develop AI software tools to help in the war on terrorism. Its AI-powered data mining systems linked seemingly unrelated pieces of information to help flush out terrorists. In recent years, Palantir has focused its attention on the enterprise sector, providing businesses with actionable insights to make data-driven decisions.
With decades of experience in the field, Palantir has been able to scale quickly and develop cutting-edge generative AI tools to help businesses succeed. The company’s latest brainchild is its Artificial Intelligence Platform (AIP), which provides users with deep insights to solve everyday business dilemmas.
A Palantir demo video shows the impact of shutting down a production line as a hurricane approaches. AIP provides suggestions on which orders to expedite, delay, or cancel, which orders can be redirected to other fulfillment centers, and how those decisions will affect delays and associated sales. It can also estimate the financial impact of renting additional trucks to expedite high-priority deliveries before the storm hits, assessing the impact that will have on profits.
Most companies would jump at the opportunity to deploy tools with these capabilities, but the complexity alone would be enough to confuse all but the most tech-savvy executives. Palantir solved the problem by hosting AIP boot camps. Developers and executives can attend these hands-on sessions, allowing them to build sophisticated applications alongside Palantir engineers and create real-world, business-specific solutions.
This strategy has been very successful, helping Palantir grow its U.S. commercial customer count by 69% year over year and 19% sequentially in the first quarter. This is largely due to the AIP bootcamps and the resulting accelerated deal volume.
This helps illustrate the vast potential of Palantir’s boot camp strategy.
The proof is in the pudding
The results are just beginning to impact the company’s bottom line. First-quarter revenue of $634 million increased 21% from a year earlier and 4% from the previous quarter, giving Palantir its sixth consecutive quarter of profitability. U.S. commercial revenue, which includes AIP, increased 40% from a year earlier, while the segment’s customer count increased 69%. Remaining revenue (RRV), or the remaining value of contracts not yet recognized as revenue, increased 74%.
Management expects the company’s growth trend to continue. Palantir raised its full-year outlook and now expects revenue of $2.68 billion, representing 20% ​​growth at the midpoint of its guidance. But what is perhaps more telling is the expected strong performance of U.S. trade revenues, which are expected to reach at least $661 million, an increase of 45%. This is up from the 40% growth forecast issued last quarter. This suggests that there is continued strong demand for AIP training camps.
Every rose has its thorns
Aside from the company’s rapid growth and ties to AI, some investors will be put off by Palantir’s valuation, which is understandable – but looks can be deceiving. The stock currently trades at 211 times earnings and 25 times sales, enough to make any value investor want to take cover. However, rapid growth tends to distort the most commonly used valuation metrics. However, a more useful metric in this case is the price-to-earnings-to-forward-growth (PEG) ratio, which is 0.79, while a value below 1 indicates an undervalued stock.
Generative AI is still in the early stages of adoption and could take years to fully deploy. Palantir is poised to be an early winner in the next phase of the AI ​​revolution thanks to its decades of expertise and brilliant go-to-market strategy.
This is why Palantir stock is a buy.
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Danny Vena holds positions in Nvidia and Palantir Technologies. The Motley Fool holds positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
Generative AI Software Sales Could Soar 18,647% By 2032. 1 Unstoppable Artificial Intelligence (AI) Stock To Buy Before It Does (Hint: It’s Not Nvidia) was originally published by The Motley Fool
