It has been roughly a yr because the newest developments in generative artificial intelligence (AI) burst onto the scene, fascinating Foremost Street and Wall Street alike. These next-gen algorithms can do excess of their predecessors, dramatically increasing productivity by drafting original documents, summarizing data, writing and correcting computer code, and even creating original presentations from existing data.
Microsoft co-founder and former CEO Bill Gates knows a thing or two about technology, and his views on AI are eye-opening: “AI is about to completely change the way you utilize computers and upend the software industry,” Gates noted recently. He goes on to say that over the next five years, generative AI “agents” will handle many day-to-day tasks, doing things that could have been unfathomable just a variety of years ago.
Conservative estimates peg the economic value of the generative AI market at greater than $1 trillion, and a number of are many times that size. This might provide a windfall for the companies and shareholders positioned to make the most of the trend. One company that’s long been on the vanguard of AI research is Palantir Technologies (NYSE: PLTR). Since the godfather of AI, the company represents a compelling addition to any AI portfolio.
Toiling inside the background for a few years
Palantir Technologies is the brainchild of entrepreneur and PayPal co-founder Peter Thiel. Throughout the wake of the 9/11 terrorist attacks, Thiel envisioned algorithms that will sift through the mounds of knowledge that U.S. intelligence and law enforcement agencies collect, identifying patterns that will detect the activities of terrorists before they might strike. In point of fact, it was In-Q-Tel, the venture-capital arm of the Central Intelligence Agency, that became one among Palantir’s first investors.
It didn’t take long before Palantir’s AI systems developed a deep following throughout the intelligence community, expanding to many other U.S. government agencies, including the Federal Bureau of Investigation, National Security Agency, and Department of Defense, amongst many others.
Nevertheless, the most important opportunity came not from the federal government but from the conclusion that these algorithms may thoroughly be used as effectively for data mining and business analytics services for enterprises.
An unlimited and growing opportunity
What sets generative AI aside from earlier branches of AI is the aforementioned increases in productivity. Time is money, so the old saying goes, and businesses of all sizes are wanting to share inside the resulting windfall.
While many proffered estimates, no person knows how big the AI opportunity will end up being. Generative AI could grow to be a $1.3 trillion market by 2032, in accordance with Bloomberg Intelligence. A much more bullish take comes courtesy of Cathie Wood’s Ark Investment Management, which estimates that AI software alone could drive incremental spending of $13 trillion by the highest of the last decade. With the market still in its infancy, nobody really knows after all. What is apparent is that a possibility of this magnitude can’t be ignored.
Paint by numbers
Palantir’s recent results paint a compelling picture. Throughout the fourth quarter, Palantir’s revenue of $608 million climbed 20% yr over yr and 9% sequentially. The outcomes were driven higher by U.S. business revenue that soared 70%, as demand for the company’s generative AI-fueled Artificial Intelligence Platform (AIP) soared. In consequence, Palantir generated its fifth consecutive quarter of profits under generally accepted accounting principles, with adjusted EPS of $0.08. Management went on to forecast in any case 40% growth inside its U.S. business segment over the approaching 12 months.
For context, analysts’ consensus estimates, which spiked before Palantir’s financial release, were calling for revenue of $602.4 million and EPS of $0.08, so it was a sturdy performance by all accounts.
In Palantir’s shareholder letter, management noted that projects that took “weeks or months, if not longer,” in the meanwhile are “up and running in as little as a variety of hours.” With a view to sustain with the demand, the company has had greater than 500 “boot camps” for purchasers since AIP made it debut. “In these immersive, hands-on-keyboard sessions, participants can expect to go from zero to utilize case in just one to five days,” the company wrote.
Palantir also notes that demand is “unlike anything we have now seen in 20 years.”
A compelling opportunity
Palantir stock has been on fire thus over the past yr or so, gaining greater than 250% because the beginning of 2023. Despite its meteoric rise, the stock stays remarkably low-cost, with a price/earnings-to-growth ratio of roughly 1, the same old for an undervalued stock.
That price, combined with the many demand for its products, and increasing sales and profitability, illustrates why Palantir Technologies is well positioned to make the most of this once-in-a-generation opportunity.
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Danny Vena has positions in Microsoft, Palantir Technologies, and PayPal. The Motley Idiot has positions in and recommends Microsoft, Palantir Technologies, and PayPal. The Motley Idiot recommends the subsequent options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short March 2024 $67.50 calls on PayPal. The Motley Idiot has a disclosure policy.
A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold For ever and ever was originally published by The Motley Idiot