1 unstoppable stock that could join Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta in the $1 trillion club

By | March 26, 2024

The arrival of artificial intelligence (AI) last year surprised many market observers, especially with the speed at which the paradigm shifted at some of the world’s most valuable companies. Apple relinquished first place Microsoftwhich now dominates with a market capitalization of more than $3 trillion. Nvidia quickly climbed the charts to take over third place behind Apple with a market cap of $2.3 trillion, spurred by its gold standard AI chips. Alphabet, AmazonAnd Metaplatforms – each with their own AI solutions – are also members of this prestigious fraternity.

Of Palantir Technologies(NYSE:PLTR) With a market capitalization of just $54 billion (at the time of writing), it might seem like a gamble to suggest it’s vying for membership in the $1 trillion club. However, the increasing demand for AI and the company’s expertise in this area suggest that the odds are likely in Palantir’s favor.

A person looking at graphs and charts on a futuristic translucent interface.

Image source: Getty Images.

AI before it went ‘viral’

It wasn’t long ago that Palantir was relatively unknown outside government agency circles. The data mining and AI specialist worked closely with the US intelligence community to track terrorists and prevent attacks before they happened. Palantir quickly expanded beyond its original mandate and created cutting-edge, custom AI models for other government agencies and enterprises, unlocking valuable insights buried deep within their data.

Palantir sprang into action when the generative AI market exploded early last year, leveraging decades of expertise and developing a solution that could be widely adopted. The fruit of these efforts is the Artificial Intelligence Platform (AIP), the company’s proprietary generative AI system, which Palantir developed in just a few months. However, it is the company’s go-to-market strategy that is driving the greatest demand.

To take advantage of these opportunities, Palantir organizes boot camps. “These immersive, hands-on keyboard sessions will allow new and existing customers to build live alongside Palantir engineers, all working toward the common goal of deploying AI in business,” management wrote in the company update for the the company’s fourth quarter. Participation in these sessions was exceptionally high, as companies have the opportunity to increase productivity or solve their most pressing business problems using generative AI solutions.

In October, Palantir presented plans to organize 500 boot camps in the coming year. The company has since “blown that goal out of the water,” completing more than 560 bootcamps for 465 organizations in just four months.

That strong and growing demand ensures robust financial results. In the fourth quarter, Palantir’s revenue of $608 million increased 20% year over year and 9% sequentially. The largest contribution came from US commercial revenues, which rose 70%, driven by demand for AIP. Palantir posted its fifth consecutive quarter of profitability, making it eligible to join the S&P500 index, which some market watchers believe will happen this year.

It was management’s outlook that really turned heads, as the company predicts at least 40% growth for the US commercial segment – ​​which includes AIP – in the coming year.

The Road to $1 Trillion

Palantir is in a unique position among AI providers. The company has a long history of AI expertise and a solid track record of fulfilling government contracts. That gives Palantir an edge in providing AI solutions to the US government and its allies, and many believe the quest for sovereign AI between countries has already begun. Add to this the enormous potential within the business community and the opportunities become clear – but this will not happen overnight.

According to Wall Street, Palantir is poised to generate revenues of $2.71 billion in 2024 and $3.23 billion in 2025, which equates to a price-to-sales ratio (P/S) of approximately 16. Assuming the P/S remains constant remains, Palantir would need to grow its revenue to roughly $60 billion per year to support a market cap of $1 trillion. Revenue grew 20% year-over-year in the most recent quarter. At that rate, it would take 16 years for Palantir to reach the $1 trillion threshold.

However, its US commercial business – fueled by generative AI – grew 70% in the fourth quarter, and management is leading at least A 40% growth for the segment, so it could soon eclipse its other sales. Palantir has a tendency to under-promise and over-deliver, so that estimate could be conservative. If the company were to increase its turnover closer to 40%, it could be worth $1 trillion or more within ten years.

Estimates related to generative AI are growing by leaps and bounds, but estimates suggest the market will be worth between $2.6 trillion and $4.4 trillion annually, according to global management consulting firm McKinsey & Company.

If Palantir captures just a small portion of that large and growing opportunity, it won’t be long before membership in the $1 trillion club is secured.

Should You Invest $1,000 in Palantir Technologies Now?

Consider the following before purchasing shares in Palantir Technologies:

The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.

View the 10 stocks

*Stock Advisor returns March 25, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Palantir Technologies. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

1 Unstoppable Stock That Could Join Microsoft, Apple, Nvidia, Alphabet, Amazon and Meta in the $1 Trillion Club was originally published by The Motley Fool

Leave a Reply

Your email address will not be published. Required fields are marked *