It’s been approximately a year since the latest breakthroughs in generative artificial intelligence (AI) emerged, captivating both Main Street and Wall Street. These next-generation algorithms can accomplish much more than their predecessors, significantly boosting productivity by generating original documents, summarizing data, coding and correcting computer code, and even creating original presentations based on existing data.
Microsoft co-founder and former CEO Bill Gates, a tech expert, made a thought-provoking statement about AI: “AI is on the verge of revolutionizing how computers are used and disrupting the software industry,” Gates recently pointed out. He further predicted that within the next five years, generative AI “agents” will handle numerous everyday tasks that would have seemed unimaginable just a few years ago.
Conservative estimates suggest that the economic value of the generative AI market exceeds $1 trillion, with some projections even larger. This presents a substantial opportunity for companies and shareholders positioned to capitalize on this trend. One pioneer in AI research is Palantir Technologies (NYSE: PLTR), making it a valuable addition to any AI-focused portfolio.
Toiling in the background for decades
Palantir Technologies, founded by entrepreneur and PayPal co-founder Peter Thiel, originated from a vision of algorithms that could sift through vast amounts of data collected by U.S. intelligence and law enforcement agencies after the 9/11 terrorist attacks. Initially funded by In-Q-Tel, the venture capital arm of the Central Intelligence Agency, Palantir’s AI systems quickly gained traction in the intelligence community and expanded to various U.S. government entities.
However, the real breakthrough came when these algorithms proved equally valuable for data mining and business analytics services for enterprises.
A vast and growing opportunity
What sets generative AI apart from previous AI iterations is the significant increase in productivity. As time is equated with money, businesses of all sizes are eager to embrace this resulting benefit.
While estimates vary, the potential of the AI market remains uncertain. Bloomberg Intelligence suggests generative AI could reach a $1.3 trillion market by 2032, while Ark Investment Management anticipates AI software could drive additional spending of $13 trillion by the end of the decade. With the market still in its infancy, the full scale of the opportunity remains unknown but undeniably substantial.
Paint by numbers
Palantir’s recent financial performance paints a positive picture. In the fourth quarter, the company saw a 20% year-over-year increase in revenue to $608 million, with U.S. commercial revenue rising by 70%. This surge was driven by demand for the company’s AI-powered Artificial Intelligence Platform (AIP), leading Palantir to achieve its fifth consecutive profitable quarter under generally accepted accounting principles, resulting in an adjusted EPS of $0.08. Management forecasts at least 40% growth in its U.S. commercial segment over the next 12 months.
Palantir emphasized that projects that used to take weeks or months can now be up and running in just a few hours, thanks to AIP. The company has conducted over 500 “boot camps” for customers to meet demand since AIP’s debut, with participants able to progress from zero to a fully implemented use case in just one to five days.
Palantir noted unprecedented demand, calling it “unlike anything seen in two decades.”
A compelling opportunity
Despite Palantir’s stock skyrocketing by over 250% in the past year, it remains attractively priced with a price/earnings-to-growth ratio of approximately 1, indicative of an undervalued stock. With strong product demand, increasing sales, and profitability, Palantir Technologies is well positioned to capitalize on this unique opportunity.
Should you invest $1,000 in Palantir Technologies right now?
Before investing in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team has identified what they believe are the 10 best stocks to buy right now… and Palantir Technologies did not make the list. The 10 stocks selected could generate significant returns in the years ahead.
Stock Advisor offers a roadmap for success, including portfolio building guidance, regular analyst updates, and two new stock picks each month. Since 2002, Stock Advisor has outperformed the S&P 500 by more than threefold*.
*Stock Advisor returns as of February 20, 2024
Danny Vena holds positions in Microsoft, Palantir Technologies, and PayPal. The Motley Fool holds positions in and recommends Microsoft, Palantir Technologies, and PayPal. The Motley Fool advises on long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short March 2024 $67.50 calls on PayPal. The Motley Fool has a disclosure policy.
A Once-in-a-Generation Investment Opportunity: 1 Artificial Intelligence (AI) Growth Stock to Buy Now and Hold Forever was originally published by The Motley Fool
a-once-in-a-generation-investment-opportunity-1-artificial-intelligence-ai-growth-stock-to-buy-now-and-hold-forever
