Artificial Intelligence is a buzzword of the year and it is heard the most during the earnings season. Each earnings season sees companies talking about their AI investments, goals, and the future of this sector. With companies spending billions in the segment, it is hard to stay away from it. Whether you are a beginner investor or a professional, holding AI stocks can be a game changer. However, it is time we moved on from Nvidia (NASDAQ:NVDA) and looked at other stocks that have the same potential.
It may not be possible for Nvidia to repeat the rally but other stocks are steadily moving higher. These companies are a big part of the AI race and could become industry leaders. I’ve identified three stocks that are yet to hit gold, but they are steadily and slowly moving upwards. Their AI investments are paying off and these three companies could make you happier than Nvidia. Let’s take a look at them.
AI Stocks to Buy: Palantir Technologies (PLTR)
I have been pounding the table on Palantir Technologies (NYSE:PLTR), and while many investors think it is priced at a premium, I think it is aptly priced. But if you miss out on this buying opportunity, you may have to pay a premium for it. Trading for $26, the stock is up 62% year-to-date and is set to hit a new 52-week high soon. PLTR is one of the best AI stocks to own.
The company is leading the AI race with its Artificial Intelligence Platform (AIP) which has attracted several commercial clients. Palantir is known to be the preferred choice of the government and it has bagged several contracts from the defence sector. It recently received a $650 million contract from the U.S. Army.
Government contracts ensure steady revenue generation. However, Palantir has now diversified into the commercial sector, and saw a 69% year-over-year jump in commercial clients in the first quarter. Its revenue stood at $634 million, and the EPS came in at $0.04. For the second quarter, it is aiming for revenue in the range of $649 to $653 million.
Wedbush analysts have an outperform rating for the stock, and the analysts see Palantir as well-positioned in the industry to be able to capitalize on the $1 trillion AI spending push. The analysts have a price target of $30. Citi analysts are optimistic about the upcoming results and consider Palantir a standout performer. The company is set to report results on August 5 and it could take the stock higher.
Oracle (ORCL)
Up 34% YTD and 18% in the past 12 months, Oracle (NYSE:ORCL) stock is exchanging hands for $139. A legacy player and one of the top AI stocks, Oracle has seen several ups and downs but has remained steady even during the market uncertainty. It already enjoys a strong reputation for its legacy database systems.
Oracle is the biggest beneficiary of companies shifting towards the cloud. It is building 100 data centers and has seen impressive growth in the data center revenue. In the fourth-quarter results, the cloud revenue jumped 20% YOY to $5.3 billion and its total revenue was up 3% to $14.3 billion.
Oracle’s outstanding performance obligations stood at $98 billion, up 44% YOY. This shows that the company will be converting the outstanding obligations into revenue in the coming quarters and the balance sheet will only get stronger. While the stock is trading at a premium, its potential is equally high.
Oracle has partnerships with some of the top tech companies in the industry including Nvidia and Palantir. These partnerships can drive growth. It could be a win-win for both companies. It entered into a partnership with OpenAI last month where ChatGPT will use Oracle’s cloud infrastructure. The steady growth in deals show that the industry sees Oracle as a very strong industry player and one that can stand the test of time.
Looking at the long-term picture, I believe Oracle is a solid AI bet with massive upside potential.
C3.ai (AI)
C3.ai (NYSE:AI) is another AI industry player that helps clients run applications. The platform offers AI-powered software to government and commercial clients. It is a subscription-based model and the steady growth in subscriptions ensures steady revenue growth. The company saw a 20% YOY jump in revenue in the recent quarter and has signed new deals on the commercial side. With a massive rise in the cloud computing market, C3.ai is set to benefit.
Despite the fundamentals and steady subscription revenue growth, the stock is trading at a reasonable valuation. It is exchanging hands for $26 at the time of writing and has dropped 6% since the beginning of the year. This dip is a chance to buy the gem. The reason behind the dip is the profitability. C3.ai reported an operating loss but managed to generate a positive free cash flow.
I believe the company has the power to turn around very soon and it enjoys a solid momentum in closing deals. This is a good sign about the future of the company. It saw a 62% YOY jump in cloud partnerships and signed 115 deals in fiscal year 2024. If it continues to win more deals at the same pace, it could hit new highs this year.
The AI space is highly competitive but C3.ai has set itself apart with its product and with the same momentum, it could reap impressive returns.
On the date of publication, Vandita Jadeja 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.
On the date of publication, the responsible editor did not have (either directly orindirectly) any positions in the securities mentioned in this article.
