Remember when “the cloud” was just an odd term in the 2010s? Well, the rise of public cloud usage from $31 billion in 2015 to nearly $200 billion in 2023 proves that the tech enthusiasts were spot-on. Technologies like Microsoft‘s Intelligent Cloud and Amazon‘s Amazon Web Services (AWS) have been pivotal in driving remarkable, over 900%, total returns for both stocks since 2015.
Artificial intelligence (AI) looms as the next monumental wave. Some compare its potential to the internet’s transformative impact. The International Monetary Fund projects AI to reshape nearly 40% of jobs worldwide, with the AI market anticipated to skyrocket from $300 billion this year to over $1.8 trillion by 2030, a sixfold surge, as per Statista data.
Below are four companies leveraging the AI growth with the potential to bring immense joy to investors in the coming six years.
Palantir’s AI Focus
Palantir (PLTR) is creating quite a buzz in the market, and rightfully so. At the heart of its business lies the management, analysis, and optimization of data using AI. Its platforms for private sectors and governments are deeply infused with AI.
Palantir’s latest product, Artificial Intelligence Platform (AIP), is tailored for defense and private sectors, employing large language models (LLMs). Take, for instance, a military operator receiving intel about enemy activity. Through Palantir’s technology, the operator can visualize the field, seek information about nearby enemy units or formations, and direct drones or satellites for reconnaissance. This substantially aids in operational decision-making.
Notably, Palantir has historically thrived on defense revenue, which serves as a lucrative income source. However, the private sector presents an equally colossal marketplace.
In the fourth quarter of 2023, Palantir’s commercial revenue surged by 32% year-over-year (YOY) to $284 million, accelerating from 23% YOY growth in Q3. Meanwhile, the government revenue also spiked by 11% to $324 million. Even more impressive, Palantir maintained profitability on a generally accepted accounting principles (GAAP) basis for the fifth consecutive quarter, an exceptional feat for a high-growth tech firm.
Though the stock trades at 25 times sales, reflecting a lofty valuation, the forward basis sales estimates reduce it to 20. While near-term risks persist due to valuation, the long-term AI prospects for Palantir remain top-notch.
UiPath’s Robust Automation
Ever heard of robotic process automation (RPA)? This technology aims to automate mundane, non-value-adding tasks, freeing up valuable time.
Consider UiPath (PATH) with over 10,800 customers, bringing in a substantial $1.4 billion in annual recurring revenue (ARR). Despite a challenging economic climate in 2023, UiPath achieved a commendable 24% growth, clocking sales at $326 million in the third quarter of UiPath’s fiscal 2024.
UiPath boasts a sturdy balance sheet with $1.8 billion in cash and investments and zero long-term debt. Furthermore, the company, while not GAAP profitable, operates with positive cash flow. Trading at 11 times sales, the stock’s valuation appears reasonable within the industry.
With the potential to save companies substantial amounts through task automation, UiPath stands to emerge as a significant, long-term beneficiary of this trend.
Evolv Technologies’ Cutting-Edge Security
Before we proceed, it’s crucial to note that Evolv Technologies (EVLV) qualifies as a more speculative stock due to its market cap of less than $1 billion. Adhering to risk management is essential, hence such speculative stocks should only form a portion of your portfolio aligned with your age, risk tolerance, and the time available to recover potential losses.
Delving into the company, Evolv Technologies offers technology with the potential to save lives and potentially enrich investors substantially.
Contrary to the traditional, time-consuming security procedures involving metal detectors and individual screenings, Evolv’s AI-powered detectors enable multiple people to pass through, identifying potential threats based on characteristics specific to firearms or knives. This approach is not only efficient but also minimizes missed items and speeds up security checks.
Targeting schools, hospitals, and stadiums as primary customers, Evolv ended the third quarter of 2023 with an ARR of $66 million, marking a staggering 129% year-over-year growth. Subscriptions witnessed an impressive 137% surge, surpassing 4,000. With a market cap of $676 million, Evolv’s valuation at 10 times ARR appears reasonable, signaling substantial growth potential.
Amazon’s AI Advantage
There’s at least one familiar name in this article, and that’s Amazon. Renowned for its expansive online marketplace, Amazon is primed to reap significant benefits from the AI boom, given the dominance of AWS as the world’s leading
Amazon’s AI Strategy Drives Spectacular Q4 2023 Earnings
A Winning AI Formula
Amazon, a leading cloud service provider, is leveraging artificial intelligence (AI) to drive its business strategy. AI, known for its voracious appetite for data, finds a robust ally in Amazon’s cloud services, which caters to the colossal data processing needs. The conglomerate’s foray into other AI solutions, such as foundational models that assist users in customizing AI software, strengthens its appeal as an AI-centric firm.
Impressive Q4 2023 Earnings
The recently released Q4 2023 earnings of Amazon reveal a staggering 14% surge in total revenue, amounting to a monumental $170 billion. Notably, the company also witnessed substantial upticks in cash flow and operating income. Despite these outstanding numbers, Amazon’s stock, although on an upwards trajectory, still lingers below its five-year average based on sales and cash flow.
AMZN PS Ratio data by YCharts
The AI Market and Investor Sentiment
Considering the pivotal role AI is set to play in Amazon’s future business trajectory, investors are ideally positioned to relish enduring benefits. The backing of a robust AI strategy is a compelling signal for investors, poised to yield fruit for an extensive future period.
Should you invest $1,000 in Palantir Technologies right now?
Before leaping into Palantir Technologies stocks, investors must heed a word of caution. The Motley Fool Stock Advisor team recently identified ten high-potential stocks for investors, wherein Palantir Technologies did not clinch a spot. This indicates the potential for substantial returns that the ten chosen stocks hold in the offing.
Stock Advisor offers investors an intuitive roadmap for success, encompassing expert insights on portfolio construction, periodic analyst updates, and two fresh stock picks each month. Since 2002, the Stock Advisor service has surpassed the S&P 500 return by a threefold margin*.
*Stock Advisor returns as of February 6, 2024
Cautious Considerations
It is worth noting that John Mackey, former CEO of Whole Foods Market and an Amazon subsidiary board member, is affiliated with The Motley Fool. Additionally, the Stock Advisor service has a track record in Amazon, Microsoft, Palantir Technologies, and UiPath. Therefore, prudent consideration is advised while bearing these affiliations and endorsements in mind.