Artificial intelligence (AI) holds unbelievable potential to alter industries. Some have likened AI to the most important transformational know-how for the reason that web.
Loads of corporations are attempting to capitalize on AI’s secular trend. Two are Palantir Applied sciences(NYSE: PLTR) and C3.ai(NYSE: AI). The previous makes use of AI to derive insights from knowledge, and the latter gives organizations with turnkey and customized AI software program.
The AI market is predicted to broaden quickly from a projected $184 billion this yr to $827 billion by 2030. Given this development, is Palantir or C3.ai the higher AI funding for the lengthy haul? Here is a have a look at every to achieve a conclusion.
Palantir has been serving to the U.S. authorities analyze knowledge since 2003, nevertheless it simply launched its synthetic intelligence platform (AIP) in 2023. With its inception, AIP helped to spur the enlargement of Palantir’s non-government enterprise.
Within the second quarter, Palantir skilled 33% year-over-year gross sales development to $307 million in its industrial division. This contributed to the agency’s Q2 revenue reaching $678 million, a 27% bounce up from the earlier yr.
Not solely is Palantir’s income rising, however its monetary well being can be glorious. It exited Q2 with a web revenue of $135.6 million, up from $27.9 million in 2023. It additionally boasted Q2 adjusted free money circulate (FCF) of $149 million, a rise from the prior yr’s $96 million.
AIP efficiently attracted industrial clients as a result of the platform permits companies to go from an AI idea to real-world implementation in as little as just a few days. This skill isn’t any small feat, and in response to Palantir’s CTO, Shyam Sankar, “therein lies our complete alternative available in the market.”
As a follow-up to AIP’s success, Palantir launched a brand new product constructed on AIP known as Warp Pace. This resolution is supposed to deal with bottlenecks within the manufacturing business by leveraging AI to enhance provide chains and a corporation’s manufacturing processes.
If Palantir can efficiently sort out this large market, which represented almost $3 trillion in U.S. gross home product (GDP) final yr, it may essentially remodel its fortunes.
C3.ai started in 2009 as an power administration firm and transitioned to AI software program in 2019. Its power business roots enabled the agency to kind a three way partnership with power big Baker Hughes to ship AI tech to the oil and gasoline sector. This allowed C3.ai to seize clients similar to Shell and ExxonMobil.
C3.ai’s software program platform can handle numerous conditions the place AI will help a enterprise, similar to fraud detection for banks. The corporate generated 84% of its income from subscriptions in its 2025 fiscal first quarter, which ended July 31. The rest got here from providers similar to coaching and buyer help.
AI demand led to fast income development for the corporate. In its fiscal Q1, gross sales hit $87.2 million, a 21% year-over-year enhance. This extends the double-digit income development C3.ai loved in its 2024 fiscal yr when gross sales reached $310.6 million, a 16% year-over-year enhance.
The agency additionally produced Q1 FCF of $7.1 million, a considerable enchancment over the prior yr’s unfavourable FCF of $8.9 million. But, C3.ai shouldn’t be worthwhile. Its Q1 web loss totaled $62.8 million.
As well as, the corporate’s partnership with Baker Hughes is contracted to finish in April 2025. This can be a key relationship for C3.ai, with some estimates suggesting Baker Hughes accounts for over a 3rd of C3.ai’s income.
Selecting Palantir or C3.ai as the higher funding is not simple. Whereas each get pleasure from robust income development, C3.ai’s lack of profitability would appear to make Palantir the higher AI enterprise to put money into. But, Palantir’s success drove up its inventory worth, with shares skyrocketing over 150% prior to now 12 months.
At this level, the agency’s shares look fairly dear when evaluating its price-to-sales (P/S) ratio to C3.ai. The P/S ratio tells you ways a lot traders should pay per share for a greenback’s price of income.
PLTR PS Ratio Chart
Wall Road agrees. The consensus amongst Wall Road analysts is a “maintain” ranking with a median share worth goal of $28 for Palantir inventory. On condition that shares commerce for round $43 on the time of this writing, Wall Road’s worth goal signifies a perception that Palantir shares are overpriced.
That mentioned, C3.ai is way from a purchase. Like Palantir, the consensus amongst Wall Road analysts is a “maintain” ranking for C3.ai inventory, with a median share worth goal of $22.
Including to that is uncertainty across the renewal of C3.ai’s partnership with Baker Hughes. Consequently, any choice round shopping for C3.ai shares needs to be delayed till this partnership state of affairs is resolved.
If not for Palantir’s sky-high valuation, it could be the higher AI funding over C3.ai, given its superior financials and AIP’s success and future potential with Warp Pace. However right now, it is best to attend for a drop in Palantir’s share worth earlier than deciding to purchase.
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Robert Izquierdo has positions in Palantir Applied sciences. The Motley Idiot has positions in and recommends Palantir Applied sciences. The Motley Idiot recommends C3.ai. The Motley Idiot has a disclosure policy.
