The adoption of artificial intelligence (AI) promises to add enormous value to the economy by increasing worker productivity, accelerating product development, and providing a greater variety of services to consumers and businesses. It’s a lucrative opportunity for investors, with Statista predicting the AI ​​market will quadruple to $826 billion by 2030.
Here are two profitable AI software companies that should be relatively safe investments over the next 10 years.
1. Palantir Technologies
Palantir Technologies (NYSE: PLTR) is a leading AI software developer used by large companies and the U.S. government. Its latest financial results continue to point to a large opportunity that could deliver strong returns for shareholders.
After experiencing a slowdown in growth last year due to macro headwinds, the company is now starting to see revenues accelerate. Revenue grew 27% year-over-year in the second quarter, driven by balanced growth in commercial and government deals.
Organizations spend more money with Palantir because it helps them improve operational efficiency and accelerate time to market with new products, while keeping their data secure. Palantir differentiates itself from competitors by focusing on projects where it adds the most value, such as expensive and complex projects that other companies are unwilling to tackle.
Palantir builds deep relationships with customers, and this is most evident in its strong growth with government. In the second quarter, Palantir’s U.S. government business grew 8% quarter-over-quarter and 24% year-over-year.
Importantly, Palantir is becoming a very profitable company, which also helps it stand out. Adjusted free cash flow margin on revenue increased from 15% in Q4 2022 to 22% in the most recent quarter.
While there will be winners and losers in the AI ​​market, Palantir’s growing revenue and free cash flow show it will be among the winners.
2.Microsoft-
Microsoft (NASDAQ: MSFT) is the 800-pound gorilla in software, with millions of users running Windows, Office and LinkedIn every day, in addition to its enterprise cloud services business. Its large installed base of users will be valuable as it seeks to transform and profit from AI functions across the enterprise.
Office 365 Commercial revenue grew 13% year over year in the fiscal fourth quarter ended June, driven in part by Copilot for Microsoft 365. The number of people using Copilot for work nearly doubled quarter over quarter.
But AI will also lead to new product categories that could benefit Microsoft’s consumer business in the long run. Microsoft recently unveiled new Copilot+ PCs, which add several AI enhancements to the user experience.
Wall Street is largely bullish on Microsoft due to the growth opportunities in its Azure cloud business, the second-largest cloud services provider. Revenue from Azure and other cloud services grew 29% year-over-year in the most recent quarter, with AI services contributing 8 percentage points to the growth. This contribution from AI is higher than in previous quarters, suggesting that Microsoft is gaining momentum in the AI ​​market.
Microsoft will be one of the safest AI stocks to hold for the long term. It’s a financial powerhouse with $74 billion in free cash flow on $245 billion in revenue. It has the cash to invest in innovative new technologies while delivering growing streams of free cash flow to drive shareholder returns.
Should You Invest $1,000 in Palantir Technologies Now?
Before you buy shares in Palantir Technologies, you should consider the following:
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
2 Artificial Intelligence Stocks to Buy and Hold for the Next 10 Years was originally published by The Motley Fool
