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Tech giants are seizing the growing demand for artificial intelligence (AI) solutions, as the transformative potential of AI is increasingly recognized across various sectors. The AI market is poised for substantial growth, with projections suggesting an increase from $184 billion this year to an impressive $827 billion by 2030.
Among the companies positioning themselves to thrive in this burgeoning field are Palantir Technologies (PLTR) and C3.ai (AI). While Palantir specializes in extracting insights from data using AI, C3.ai offers tailored AI software solutions for organizations.
Palantir’s Growth Trajectory
Palantir has been a key player in data analysis for the U.S. government since its founding in 2003, and it unveiled its artificial intelligence platform (AIP) in 2023. The introduction of AIP has been a significant catalyst in broadening Palantir’s business beyond government contracts.
The second quarter of 2023 saw Palantir’s commercial division experience a robust 33% increase in year-over-year sales, reaching $307 million. Overall, the company’s revenue grew to $678 million for the quarter, a notable 27% rise compared to the same period last year.
Financially, Palantir shows strong health, closing Q2 with a net income of $135.6 million, a substantial increase from $27.9 million in the prior year. The company also reported an adjusted free cash flow (FCF) of $149 million, improving from $96 million in 2022.
AIP stands out for its effectiveness in swiftly transitioning businesses from AI concepts to operational applications, sometimes within just days. Palantir’s CTO, Shyam Sankar, noted that this agility represents a significant market opportunity for the company.
Building on AIP’s momentum, Palantir launched Warp Speed, a new product designed to resolve inefficiencies in manufacturing by utilizing AI to enhance supply chain management and production processes. If successful, this innovation could greatly impact a sector that accounted for nearly $3 trillion of the U.S. gross domestic product (GDP) last year.
Exploring C3.ai’s Position
Founded in 2009, C3.ai originally focused on energy management before shifting its focus to AI software development in 2019. This transition allowed the company to partner with Baker Hughes, leveraging AI solutions in the oil and gas arena and securing clients such as Shell and ExxonMobil.
C3.ai’s platform is versatile, catering to various business needs, including fraud detection for financial institutions. In the company’s first fiscal quarter of 2025, which concluded on July 31, around 84% of its revenue was generated from subscriptions, with the remainder derived from support services.
The rise in AI demand has translated into significant revenue growth for C3.ai, which reported $87.2 million in sales for the first fiscal quarter, marking a 21% increase from the previous year. The company also saw its fiscal year 2024 sales reach $310.6 million, representing a 16% year-over-year growth.
Despite these gains, C3.ai is still posting net losses, with Q1 reporting a loss of $62.8 million. Additionally, the company faces uncertainty regarding its partnership with Baker Hughes, which is scheduled to conclude in April 2025. This partnership is crucial as estimates suggest it contributes significantly to C3.ai’s revenue.
Evaluating Investment Potential: C3.ai versus Palantir
Determining whether to invest in Palantir or C3.ai is complex. While both companies demonstrate substantial revenue growth, the lack of profitability in C3.ai could position Palantir as the more favorable choice. However, Palantir’s stock has surged over 150% in the past year, leading to concerns about its current valuation.
Evaluating the companies’ price-to-sales (P/S) ratios may indicate potential overvaluation, as Palantir’s shares trade at a higher ratio compared to C3.ai. Wall Street analysts currently suggest a “hold” rating for both companies, with a median price target of $28 for Palantir and $22 for C3.ai.
Furthermore, the uncertainty surrounding C3.ai’s future partnership could warrant caution for potential investors. While Palantir displays stronger financial fundamentals and product innovations, the high share price makes it prudent to consider waiting for a more attractive entry point.
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