Palantir Technologies (NYSE: PLTR) is quickly becoming the go-to provider of artificial intelligence (AI) software platforms for firms and governments across the globe. Evidence of this might be seen within the recent acceleration in the corporate’s growth in addition to its improving revenue pipeline. Each metrics point toward higher times ahead.
Investors are noticing and have been buying Palantir stock hand over fist. The stock is up a formidable 76% to this point in 2024, and the next discussion offers clues as to why that has been the case.
Palantir’s AI software platform has gained impressive traction
When Palantir released its second-quarter results last month, the corporate reported a year-over-year increase of 27% in revenue to $678 million. That was a solid improvement over the 13% year-over-year growth the corporate delivered in the identical period last yr, in addition to an acceleration over its Q1 revenue growth of 21%.
There was a pleasant jump in the corporate’s customer base, in addition to the scale of the deals that it has been striking with customers. Palantir management credited its improving growth profile to the growing adoption of its Artificial Intelligence Platform (AIP). This can be a software platform that helps enterprises and governments integrate generative AI into their processes to assist improve operational efficiency.
From helping customers construct their very own large language model (LLM)-powered applications to helping them speed up their every day workflows with the assistance of generative AI, the usefulness of Palantir’s AIP seems to have struck a chord with customers. This explains why the corporate raised its 2024 revenue growth forecast and expects its top line to extend by 24% this yr to $2.75 billion.
More importantly, Palantir seems able to sustaining its outstanding growth in the long run, considering that it ended the previous quarter with $4.3 billion in remaining deal value (RDV). The metric refers to the entire remaining value of Palantir’s contracts at the tip of a period, and it rose 26% yr over yr in Q2.
This AI hardware giant is making strides within the AI software market
So, Palantir seems well on its method to benefiting from the large end-market opportunity available within the generative AI software market. Nevertheless, there’s one other way for investors to capitalize on the booming demand for AI software, and a better look may lead investors to think that it might be a greater AI software stock than Palantir.
Nvidia (NASDAQ: NVDA) has been the go-to alternative for firms seeking to purchase high-end AI hardware in order that they’ll train AI models, leading to outstanding growth in the corporate’s revenue and earnings in recent months. What’s interesting is that CFO Colette Kress’ comments on the recent earnings conference call suggest that Nvidia is beginning to make a dent within the enterprise AI software market as well. In response to Kress, “We expect our software, SaaS, and support revenue to approach a $2 billion annual run rate exiting this yr, with Nvidia AI Enterprise notably contributing to growth.”
CEO Jensen Huang also commented, mentioning that customers can deploy Nvidia AI Enterprise software for $4,500 per graphics processing unit (GPU) per yr. On condition that Nvidia’s AI GPUs are priced at $30,000 or more for a single chip depending on the configuration, enterprise customers seeking to construct and deploy AI models are getting a superb deal through Nvidia’s AI software platform.
Nvidia provides customers with multiple AI software offerings. For instance, the corporate’s AI Foundry platform, which was launched in July this yr, is an end-to-end solution with which customers can construct and deploy custom generative AI models. Nvidia offers popular foundation models that might be tweaked by its customers and quickly move AI applications (including chatbots, content creation tools, and document processing tools) into the production phase.
Nvidia also provides pretrained customizable AI workflows that might be used for extracting data from PDFs or deployed for creating customer support workflows, accelerating drug discovery in the sector of drugs, or constructing custom generative AI apps suited to a company’s needs. What’s value noting is that the adoption of Nvidia’s software solutions is increasing at a terrific pace because of AI.
In its February earnings conference call, Nvidia management identified that its software and services offerings reached an annual revenue run rate of $1 billion within the fourth quarter of fiscal 2024. So, the corporate’s software and services revenue run rate is about to double within the space of only one yr. That is significantly faster than the pace at which Palantir’s top line is about to grow this yr.
Throw within the undeniable fact that Nvidia advantages big time from the booming demand for its AI chips, which led to 122% year-over-year growth in the corporate’s revenue within the second quarter of fiscal 2025 to $30 billion, and it is simple to see that the chipmaker is the more diversified play on AI. One other point value noting here is that Nvidia stock trades at 28 times sales, which is lower than Palantir’s sales multiple of 29.
What’s more, Nvidia is the more attractive AI stock once we compare the earnings multiples of each firms.
So, investors on the lookout for a less expensive alternative to Palantir to reap the benefits of the AI software market’s growth would do well to take a better have a look at Nvidia, especially considering that the latter already has a flourishing AI hardware business that makes it a greater growth stock to purchase straight away.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Nvidia and Palantir Technologies. The Motley Idiot has a disclosure policy.
Meet the Artificial Intelligence (AI) Stock That Could Grow to be the Next Palantir, or Even Higher was originally published by The Motley Idiot