I recently covered three companies that used artificial intelligence (AI) to grow their consumer-facing businesses. I’m following that up by providing readers with three AI stock predictions.
In this instance, I’m going with names like Microsoft (NASDAQ:MSFT) that are knee-deep in its AI involvement.
In the latest earnings cycle, the markets have not been kind to AI-related stocks.
Upstart Holdings (NASDAQ:UPST) reported Q3 2023 results on Nov. 8. Its shares fell 27% on the day because it missed revenue and earnings estimates by a slim margin and lowered its revenue estimate by a small amount.
InvestorPlace’s Samuel O’Brient recently discussed 10 AI stocks that would become trillion-dollar companies between 7 and 99 years in the future. It’s an exciting group that includes Upstart. They say timing is everything.
Although Upstart’s AI lending platform has merit, here are my three AI stock predictions.
Palantir Technologies (PLTR)
Palantir reported third-quarter results on Nov. 2. They were so good its shares jumped 21% on the news.
Investors were enthusiastic about its opportunities in AI. Its adjusted earnings per share in the quarter were .07 cents, a penny better than the consensus estimate, and 7x higher than a year ago. On the top line, its revenue was $558 million, 2 million higher than analysts’ expectations.
I’m starting to get the sense there’s no rhyme or reason to how investors react to earnings reports. Palantir barely beat analyst estimates on the top and bottom line, yet PLTR stock jumped 21%.
Why? Read CEO Alex Karp’s shareholder letter to get an idea.
The company’s record profit of $72 million in the third quarter was its fourth consecutive quarter with a profit, making it eligible for inclusion in the S&P 500. That’s a big deal.
Also, a big deal is AIP (artificial intelligence platform), the company’s solution for both its current commercial and government clients and potential ones. Karp has said he’s never seen anything like the interest in AIP in the past 20 years.
I like the potential growth of Palantir’s latest platform.
The Trade Desk (TTD)
It’s been a while since I last talked about The Trade Desk (NASDAQ:TTD), which provides real-time programmatic marketing automation technologies. It uses many data points to give advertisers a higher return on investment.
TTD stock is up 79% year-to-date and 543% over the past five years.
As I write this, it has yet to deliver its latest quarterly results, which it will do after the markets close on Nov. 9. On the top line, it is expected to generate revenue of $487.2 million (23.4% higher year-over-year), with adjusted earnings of $0.29 a share.
Of the 34 analysts covering its stock, 25 rate it Overweight or an outright Buy, with a target price of $95, 20% higher than its current share price.
As it relates to AI, The Trade Desk launched Kokai in June.
“Kokai’s distributed AI capabilities build on The Trade Desk’s pioneering AI work with Koa, launched in 2018. While Koa assisted the marketer in setting up campaigns based on business objectives and optimizing based on performance, Kokai distributes the power of Koa’s AI across various aspects of media buying on The Trade Desk platform,” stated its press release announcing the launch.
Knowing The Trade Desk has used AI in its business since at least 2018 should be encouraging if you’re a shareholder or thinking of buying its stock.
I included C3.ai (NYSE:AI) in my trio of stocks because you can’t have a story about AI and not have an AI stock be a part of it. Seriously, though, I’ve always liked the business because of CEO and founder Tom Siebel’s tech experience.
In April 2022, I argued that AI stock was a value play at $24 and a growth move at a reasonable price between $24 and $30. Up 144% in 2023, it’s finally getting some recognition from investors.
Will it be enough?
In September, the company said its revenue in fiscal 2024 would be between $295 million and $320 million, while its non-GAAP operating loss would be $85 million at the midpoint of its guidance.
Even though C3.ai continues to win new business, it remains a relatively small tech company in revenue and market cap. That’s good and bad. The glass-half-full view is that it should be very attractive to larger firms looking to grow their AI presence. The glass-half-empty is that investors won’t take it seriously because it is only worth $3 billion.
While there’s no question it has a lot of work to do before it becomes a large cap, the fact that it identified AI as a significant trend long before most in the tech industry suggests it deserves a little more respect from investors.
We will see if it gets it in 2024.
On the date of publication, Will Ashworth did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.