Palantir stock is soaring. Are the top AI stocks to buy now?

It’s been more than a year since the launch of ChatGPT took hold of the AI ​​revolution. Palantir (NYSE:PLTR) emerged as one of the winners.

The data analytics company, known for helping large government agencies and businesses sort through large amounts of data, turned profitable last year and launched a new artificial intelligence platform (AIP), causing its stock price to rise. It rose by 167%.

Investors welcomed Monday’s fourth-quarter earnings report after the company reported strong financial results.

Palantir reported a 20% increase in revenue to $608.4 million, beating the consensus of $602.4 million. The company once again achieved high profitability, achieving five consecutive quarters of profitability under generally accepted accounting principles (GAAP) and a profit margin of $93 million, or 15%.

The company experienced particularly strong growth in its U.S. commercial division, where sales rose 70% to $131 million, accounting for nearly a quarter of total sales. Total U.S. commercial contracts grew 107% to $343 million, and we forecast U.S. commercial revenue to increase 40% to at least $640 million in 2024, as companies begin to implement AIP. It was shown that there is.

In the end, adjusted earnings per share doubled to $0.08, beating analyst expectations, as the company kept operating expenses roughly flat again and guidance remained strong.

Management expects 2024 sales to be approximately $2.65 billion, representing 19% growth, accelerating from 17% in 2023. The company is also looking for adjusted operating income of $834 million to $850 million, or a profit margin of 32%.

Palantir is gaining momentum

During the earnings call, management lacked enthusiasm for the business and the demand for artificial intelligence (AI).

In a letter to shareholders, CEO Alex Karp wrote that the power of large-scale language models and natural language processing is “virtually useless without systems to interact with the proprietary data that underpins an organization.” “Data is often scattered across hundreds, if not thousands, of different repositories.” ” Karp added, “AIP is connective tissue, and the organic and unrestricted demand for its function is unlike anything we have seen in the last 20 years.”

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Karp also called AIP the company’s fourth platform alongside Gotham, Foundry and Apollo, saying, “We believe AIP is the future of our company and will become the dominant platform for the entire industry.” I did.

During the earnings call, management touted the company’s appeal to potential employees, saying they had never seen so many people come to the company looking for work.

Is Palantir stock worth buying?

Palantir hasn’t seen such exponential growth. Nvidia has so far captured most of the spoils of the AI ​​boom, but the two companies offer different services.

Semiconductor stocks like Nvidia are cyclical, and the current boom reflects a surge in demand for the company’s processors. Palantir, on the other hand, is a cloud software stock whose revenues tend to be stable in this industry because customers sign multi-year contracts rather than buying products once for a specific project.

Given that and the company’s strong ties to the U.S. government, it’s unlikely that earnings will suddenly accelerate. But investors should be encouraged by Palantir’s expanding margins after years of losses, and the company’s strength in the U.S. commercial space should also be supportive.

Palantir stock trades at a forward price/earnings ratio of 70x, which seems like a reasonable price for a stock that is emerging as a leader in AI software, and the company’s AIP could boost its earnings over the next few years. There is sex.

The demand for AI services and capabilities is only just beginning to grow, and Palantir should continue to be a winner.

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Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has a position in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

Palantir stock is soaring.Are the top AI stocks to buy right now? Originally published by The Motley Fool