Investing

Forget Semiconductors. These 2 AI Software Stocks Just Starting to Heat Up

Joey Frenette

Published: December 8, 2024 12:20 pm

The semiconductor stocks have had an incredible run, but as the AI revolution moves further down the stream to some of the software names, a new slate of winners may be minted in the new year. Undoubtedly, AI hardware (think custom accelerators and GPUs) and the other ingredients that go into AI data centers (high-performance memory and optical cables) will always be lucrative as the AI revolution moves on.

That said, some of the AI-capable enterprise software firms, many of which have been in a funk over the past year or so, still seem to be undervalued relative to the AI tailwinds that may be just starting to propel them higher.

Let’s check in on two of the names worth stashing on the radar going into 2025, a year that could be full of new AI advancements, most notably agentic AI.

Key Points About This Article

• Semiconductor stocks are overdue to take a breather as more focus moves to AI software and applications.
• Palantir and Salesforce could get even hotter in the new year as we learn more about their incredible AI drivers.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Palantir

Of course, Palantir (NASDAQ:PLTR) is the AI software leader that first shined a bright light on the software scene when it pulled the curtain on its own incredible quarterly earnings results just over a month ago, sparking a fierce melt-up that took Alex Karp’s empire up double-digit percentage points in a month.

Now up over 136% in three months, the momentum play feeling AI tailwinds may be a tad overstretched and perhaps even overvalued if you’re not so convinced the growth spurt hitting software will extend into 2026. Palantir’s AI Platform (AIP) is the real deal. And it seems to still be in the early days of its growth story. That said, the hefty multiple — 342.2 times trailing price-to-earnings (P/E) — makes the name a risky bet that may have very little room for error.

Can the excitement factor get any better in 2025? I think it can, as the firm looks to get a seat in the Nasdaq 100.

Recently, Palantir deepened its relationship with the U.S. government with the recent granting of FedRAMP High Authorization, allowing Palantir cloud technology to work with some extremely sensitive information.

Additionally, CTO Akash Jain’s words were immensely encouraging for the bulls as the company seeks to “accelerate our work with other technology partners.” In any case, Palantir strikes me as one of the earlier AI software attendees to the AI party. Perhaps a less-appreciated latecomer could hold more upside.

Salesforce

Salesforce (NYSE:CRM) is starting to get the AI crowd excited with its impressive Agentforce offering, which can help clients build “powerful” AI agents right in the Salesforce platform. Indeed, AI agents can be a rather abstract concept for many as 2024 comes to a close.

Come the new year, I’d look for agents to become one of the new needle-movers in this AI race. And Salesforce seems to be one of the firms keen on advancing us out of the copilot age (CEO Marc Benioff has been a vocal critic of copilots) and into the age of agentic AI.

Could digital agents be the corporate money-makers of the future? I’d say there’s a good chance of that. Heck, Benioff claims his firm is already making money on these agents. I wouldn’t bet against this man. Not while Salesforce looks to melt up toward $450 per share, the new Street-high price target (courtesy of JMP Securities) on the name.

With Salesforce stock blasting off to new highs (just north of $360 per share) following its latest quarter, shares seem overheated. That said, with a strong positioning ahead of a potential agent boom, I think CRM stock is still relatively cheap if AI agents live up to the hype.

Wedbush Securities analyst Dan Ives is among the many believers in Salesforce as it enters the AI agent race.

Specifically, he likes the company’s “AI monetization story,” viewing products like Agentforce as a “key growth catalyst for the tech stalwart over the coming years,” I couldn’t agree more. Salesforce seems to be leading the charge for AI in the enterprise. And while it’ll take time for agents to really capture the hearts of investors, I do see a potential stage set for an AI-induced growth renaissance over at the enterprise software titan.

The bottom line

Palantir and Salesforce are heating up, and they have the potential to get even hotter in 2025, thanks to impressive AI offerings (AIP for Palantir; Agentforce for Salesforce) that could bring in applaud-worthy growth numbers for quarters to come.

Sure, valuations may be concerning to some, but if you want top-of-the-line growth, that’s the going price of admission these days. Given the magnitude of tailwinds lying ahead for PLTR and CRM, I’d argue that today’s price is a fair price.