Unlocking the Potential of AI Software Platforms
The artificial intelligence (AI) software market is booming, and investors are taking notice. Palantir Technologies, a leading player in this space, has seen its stock soar 380% this year, driven by strong demand for its AI-focused offerings. However, with a price-to-sales ratio of 75 and a trailing earnings multiple of 412, Palantir’s valuation has become extremely rich.
A More Affordable Alternative
For investors seeking a more reasonably priced entry point into the AI software market, C3.ai presents an attractive option. Despite being a smaller company, C3.ai has demonstrated impressive growth, with its stock up 23% this year. Moreover, it trades at significantly cheaper valuations than Palantir, making it an appealing alternative for those looking to capitalize on the AI software boom.
A Massive Addressable Market
According to market research firm IDC, the AI software platforms market is expected to grow from $28 billion in 2023 to a staggering $153 billion by 2028. This presents a massive opportunity for companies like Palantir and C3.ai to thrive. Both companies have seen upticks in their growth rates since the beginning of 2023, with Palantir’s revenue increasing 30% year over year to $726 million in the third quarter of 2024, and C3.ai’s top line jumping 29% year over year to $94 million in its fiscal 2025 second quarter.
Similar Growth Profiles
Both Palantir and C3.ai have reported almost identical growth rates in their latest quarters, and both companies have increased their full-year revenue guidance as demand for their generative AI software solutions grows among commercial and government customers. C3.ai has also partnered with major cloud service providers like Microsoft and Google to expand its reach, offering an enterprise AI application development platform that allows customers to build their own solutions.
Can C3.ai Follow in Palantir’s Footsteps?
While C3.ai is currently a smaller company than Palantir, its top-line growth was almost the same as Palantir’s last quarter, and both companies expect to report a 25% increase in their top lines in the current fiscal year. Analysts anticipate robust double-digit percentage growth over the next couple of years, and both companies have seen their growth expectations increase.
A Compelling Investment Opportunity
With a sales multiple of 13, less than a fifth of Palantir’s, C3.ai presents a compelling investment opportunity for those looking to benefit from the growth of the AI software market at a reasonable valuation. As the adoption of generative AI software increases, C3.ai’s growth prospects could continue to improve, making it an attractive alternative to Palantir.
Leave a Reply