An estimated $1 trillion shall be invested into expanding artificial intelligence (AI) services over the next several years in every thing from graphics processors to software. Many tech corporations will make the most of this massive investment, but which shall be among the finest long-term AI stocks to own?
Let’s take a quick have a have a look at two key AI players immediately — Palantir Technologies (NYSE: PLTR) and Microsoft (NASDAQ: MSFT) — to see how each is winning of their respective markets and which one may be the upper AI stock for years to return.
The case for Palantir
Palantir has spent years creating advanced AI systems that government agencies use to sift through reams of data and make among the finest decisions. An enormous chunk of its sales still come from its government contracts — just over half — but the company has expanded its AI footprint over the past few years into the commercial sector as well.
Industrial segment revenue jumped 33% inside the second quarter (which ended June 30) and accounted for about 45% of Palantir’s total sales. Why does expansion of economic sales matter for Palantir? Because it proves that the company’s AI tech is robust and will be repurposed in a rapidly expanding AI market.
Not all corporations can claim that. Consider what chief technology officer Shyam Sankar said on the company’s recent earnings call about its advantage over AI competitors: “[W]here the market is completely bottlenecked is on that transition from prototyping to production. And that happens to be the place that we’re most differentiated.”
Indeed, while others are playing catch-up, Palantir is already benefiting from years of AI investments. Management estimates U.S. industrial sales will jump 47% in 2024 to $672 million. Leadership also increased its full-year sales guidance to a diffusion of $2.74 billion to $2.75 billion — up about 23% from last 12 months.
The case for Microsoft
Microsoft will not be probably probably the most exciting name in AI immediately, nevertheless it’s actually probably probably the most vital. The company has already invested an estimated $13 billion into ChatGPT creator OpenAI, and its early bet in probably probably the most influential AI start-ups is already paying off.
Microsoft quickly put its investment to work by integrating the underlying ChatGPT tech into its popular suite of Microsoft 365 software products, its GitHub developer platform, and Azure cloud computing services.
A very powerful AI opportunity from all of this likely comes from Azure. Microsoft has the second-largest cloud computing service by market share (25% immediately) after Amazon, and its recent AI tools are expanding its reach. Management said on the fourth-quarter earnings call that Azure now has 60,000 AI customers, roughly 60% higher than the year-ago quarter.
Why does this matter? Because sales inside the cloud computing market will grow to an estimated $2 trillion by 2030, based on Goldman Sachs. AI is driving a couple of of that growth already, and Microsoft should profit as more corporations look to its AI cloud services to spice up their very own AI offerings.
Microsoft is the upper AI stock
While Palantir has loads of opportunities inside the AI market, there are two reasons I feel Microsoft’s stock is the upper option. First, it’s miles cheaper than Palantir’s shares.
Microsoft’s shares have a forward price-to-earnings ratio (P/E) of 32 immediately. While not exactly inexpensive, it’s miles less pricey than Palantir’s forward P/E of 87.
Second, Microsoft’s substantial investment in OpenAI and its position inside the cloud computing market mean that the company has access to a couple of of probably the most advanced AI available immediately and an expanding market to implement it.
With its cheaper price tag and an infinite AI cloud market to learn from, Microsoft is now likely a greater long-term AI play than Palantir.
Do you will have to take a position $1,000 in Palantir Technologies immediately?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Amazon, Goldman Sachs Group, Microsoft, and Palantir Technologies. The Motley Idiot recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
Higher AI Stock: Palantir vs. Microsoft was originally published by The Motley Idiot