If asked to name a few artificial intelligence (AI) companies, most investors would probably point to the big tech companies like Amazon, Alphabet, and Microsoft. There’s nothing wrong with these companies — they’re leaders in the AI revolution. But there are other, smaller companies that are just as well-positioned and have the potential to become the giants of the future.
The purpose of this article is to introduce you to two little-known companies that have been in business for years and are positioned to benefit from the shift to AI.
Image source: Getty Images.
Palantir
Palantir (NYSE: PLTR) may not be a household name like Amazon or Google, but that doesn’t make it an unimportant player in the tech industry. On the contrary, the company is a key player in the enterprise software sector, serving large companies in both the public and private sectors, including governments, major banks, and oil companies.
As its name suggests, Palantir aims to help its customers gain insights and transparency through data. The company started out by providing insights from its software platform, Gotham, to help the U.S. Department of Defense with counterterrorism efforts. It has since expanded to other public agencies, both domestically and internationally, and has accelerated investments in the private sector in recent years.
With over 20 years of experience in providing software tools for analyzing large, complex datasets, Palantir is well-positioned to leverage its know-how to deliver AI solutions to existing and new customers. For example, existing clients can leverage their past investments in data infrastructure to easily run Palantir’s latest AI software tools, including machine learning, generative AI, and more.
Moreover, Palantir has built a strong reputation over the years serving large enterprises around the world, giving it a significant advantage in attracting new customers: its chief technology officer, for example, would likely find it easier to convince the CEO and board of directors to adopt Palantir’s software solutions over those of other AI startups.
Palantir’s strong financial performance over the past few years reflects the company’s strong market position: Over the past five years, revenue has tripled from $595 million in 2018 to $2.2 billion in 2023, a compound annual growth rate (CAGR) of 30%. Over the same period, the company’s bottom line has also improved from a loss of $580 million to a profit of $210 million.
Palantir exhibits a rare combination of strong growth and profitability. The only major drawback to this stock is its sky-high valuation. As of this writing, the price-to-earnings (P/E) ratio is 239. Therefore, conservative investors, barring a few risk-takers, should continue to keep an eye on this stock for the time being.
The story continues
C3.ai
C3.ai (NYSE: AI) is an enterprise AI software company that went public in 2020. Although it is a relatively new public company, it has been in the market for nearly 15 years.
Founded in 2009 by Thomas Seibel, who founded CRM company Seibel Systems and sold it to Oracle, C3.ai offers AI solutions through a Software as a Service (SaaS) business model. The company primarily offers its services through the C3 AI Suite and C3 AI Applications.
C3 AI Suite is an AI platform that helps clients design, build, and deploy AI applications in their business. The platform allows clients to build customized applications to meet their daily operational needs. C3 AI Applications, on the other hand, are ready-made applications that clients can install and use immediately. Typically, these apps were previously developed for another company in the same industry.
Like Palantir, C3.ai provides AI-related software solutions to help large enterprises improve their operations using AI technology. C3.ai has also invested heavily in the AI industry, winning large contracts over the years from clients such as the U.S. Air Force, Shell, and AstraZeneca.
Like Palantir, C3.ai’s first-mover advantage has translated into strong growth: Over the past five years, revenue has more than tripled, from $92 million in the fiscal year ending April 30, 2019 to $311 million in the fiscal year ending April 30, 2024. However, unlike its larger peers, C3.ai remains in the red as it continues to invest heavily in research and development, sales, and marketing.
Investors should note that while C3.ai’s valuation is not as high as Palantir’s, it’s not cheap either. At the time of writing, C3.ai’s price-to-sales (P/S) multiple is 11.5, while Palantir’s P/S multiple is 28.7. However, compared to established tech giants like Alphabet, which has a P/S multiple of 7.7, the young company’s stock looks expensive.
So, while C3.ai’s outlook looks promising, investors should keep in mind that the company is still not profitable and the stock is not in cheap territory. Therefore, investors would be best off tracking the stock for a while before making their next move.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet, Amazon, Microsoft, Oracle, and Palantir Technologies. The Motley Fool recommends AstraZeneca and C3.ai and recommends long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Two Hot AI Stocks were originally published by The Motley Fool.
