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Missed Out on NVIDIA's Run-Up? This Is the Best AI Stock To Buy Now

John Seetoo

Published: August 11, 2024 8:34 am

24/7 Wall Street Insights

• Predictive Analytics company Palantir has successfully expanded its counterterrorism threat analytics platform to industrial espionage and crime liability intervention.
• Palantir’s AI platform is exciting Wall Street analysts with its potential to optimize its Big Data analysis platforms and reduce its dependence on US government contracts. 
• Palantir’s shifting emphasis towards AI makes it a legitimate company to consider for non-Magnificent Seven AI sector exposure.
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From Counterterrorism to Business Consulting

Over the past 3 decades, the rise of Big Data processing led to the development of Predictive Analytics and Intelligence as a separate division within the technology sector. Not surprisingly, this is the kind of work that fits the CIA like a glove, which is why it was a ground-level investor in Denver headquartered Palantir Technologies (NYSE: PLTR) prior to its launch. Founded by a team led by Chairman Peter Thiel, who also co-founded PayPal with Elon Musk, Palantir was originally created to analyze data for US intelligence agencies and Department of Defense to aid in the identification and interdiction of potential terrorist threats.

Palantir’s Gotham, Metropolis, Foundry and Apollo platforms all interact to create a predictive analytics SaaS platform. Savvy management moves have successfully expanded its business model from anticipating and preventing threats to society to helping the interdiction of potential espionage, robbery, data theft, and conspiracy at the corporate level.

Palantir’s continued US government, private foundation, international organization, and municipal contracts, which also include law enforcement agencies, the US Navy, US Air Force, the Centers for Disease Control, and the United Nations, still account for a hefty portion of the company’s annual revenues. Its corporate clientele now counts Airbus and Ferrari among its more celebrity names. Palantir Technologies has been covered a number of times by 24/7 Wall Street in past articles.

Artificial Intelligence – Palantir’s Rocket Fuel?

Palantir’s AI platform provides unified access to open-source, self-hosted, and commercial large language models (LLM). The AI can transform structured and unstructured data into LLM-understandable objects, therefore turning an organization’s processes and operations into tools for humans and LLM-driven agents. 

The early R&D for Palantir’s AI was focused on actionable intelligence needs of the US government. The company has since migrated applications of the AI for corporate clients. However, Palantir recognized it needed to bridge a knowledge gap that existed for the corporate clients. They subsequently designed a series of educational workshops, called “boot camps.” The boot camps team Palantir engineers with client IT personnel to customize solutions for each company’s unique problems. Since late 2023, Palantir has held 1,300 boot camps, with 500 since May 2024.

The revenue generation potential of Palantir’s AI platform has wowed some analysts, including Bank of America and Wedbush Securities, whose analyst, Dan Ives, proclaimed Palantir the “Messi of AI”. Ives was also quoted: “a handful of times every decade, there are tech companies that are so ahead of the competition and in a sweet spot of the future growth…” 

The AI platform is already supplying the ammo for the shift towards Palantir’s commercial business.  Q1 2024 revenue leaped 40% year over year, and US commercial customer count soared 69%. Most significantly, the remaining deal value — which gives an insight into its future trajectory – grew 74%, and metrics indicate its growth will continue.

Wedbush targets Palantir stock to hit $50 by 2025. This equates to an upside potential of 85%.

A Different Kind of AI Horse in The Race?

Nvidia has had a huge run over the last year, but it has recently given back some of that bull run post-split. The other Magnificent Seven stocks with an AI component, such as Microsoft, Amazon, Alphabet, and Meta Platforms, are already on many investors’ lists. Palantir is a dark horse in the AI race with a different set of rivals and a different client base. If one can live with Palantir’s very high valuation (227x earnings) and its reduced amount of disclosure (due to its dealings with US government Department of Defense and intelligence agencies), it may just be the best AI stock to buy now.