In early November, Palantir Technologies(NASDAQ: PLTR) released a sturdy third-quarter 2024 report. Alex Karp, CEO of the artificial intelligence (AI)-powered data analytics company, included a press release within the press release. It has a sentence I think investors should keep on the forefront of their minds after they make investing decisions in 2025 and beyond.
Within the context of his full statement, he means the AI haves can be winners, and the AI have-nots can be losers. He’s talking in a really broad sense — from corporations to countries. This black-and-white proclamation is way stronger than the standard comments one hears about how necessary AI can be.
Why should investors give any power to Karp’s word? Beyond his seemingly being extremely brilliant, even in Silicon Valley terms, here’s an excellent reason: Palantir stock’s gain of 341%, which crushed the S&P 500‘s 25% return, made it 2024’s best-performing stock on the S&P 500 index. This performance stems from the corporate’s robust quarterly results and guidance easily beating Wall Street’s expectations and investor enthusiasm about its long-term growth prospects.
Topping the S&P 500 index’s best-performers list can be an excellent feat for any company at any time. But doing so soon after going public (Palantir’s initial public offering was in September 2020) is amazingly rare, even perhaps unprecedented.
So, what stocks — beyond Palantir, which is the most effective AI stocks — do I feel investors should favor in the event that they keep Karp’s statement in mind when selecting stocks to purchase?
If we accept that AI is so critical that “the world can be divided between AI haves and have-nots,” it naturally follows that whatever company leads in supplying AI technology can be an enormous winner, assuming the market doesn’t get too fragmented and develop into commoditized.
Currently, that company is Nvidia (NASDAQ: NVDA), whose stock has already been an enormous winner. Nevertheless, together with the AI market, it still has much room to grow significantly over the long run. The corporate’s graphics processing units (GPUs) dominate the advanced AI chip market.
But Nvidia is so far more than simply a chip or hardware supplier. It supplies entire solutions or platforms comprising hardware, software, and other tools for its goal markets (data center, skilled visualization, gaming, and auto/robotics). This full-stack strategy, together with its partnering with quite a few top corporations, gives Nvidia a competitive advantage.
One other thought that naturally flows to my mind from Karp’s statement pertains to the importance of company size. In lots of industries, larger corporations have long had a competitive advantage over smaller ones as they profit from economies of scale. In addition they often have more resources to make acquisitions and fund research and development initiatives.
If we accept that AI can be so critical that it separates the winners from the losers across the economy, the advantage that many large corporations already enjoy should develop into turbocharged. Larger corporations will generally have more resources to spend on obtaining the most effective AI capabilities — and Nvidia’s GPUs are very expensive, as is hiring top AI talent.
This point suggests it might be smart for investors to favor the massive tech corporations much more so than within the recent past. Together with Nvidia, those corporations include Apple, Amazon, Alphabet, Microsoft, and Meta Platforms. Electric vehicle (EV) pioneer Tesla can be often included as an enormous tech company since it’s heavily involved in AI.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Idiot’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. Beth McKenna has positions in Nvidia. The Motley Idiot has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Idiot recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.