One of the biggest drivers of the market recovery over the past year or so has been the rapid and continued adoption of artificial intelligence (AI). Recent developments have marked a quantum leap in the technology, promising to automate a wide range of mundane tasks, increasing productivity and saving money.
In recent weeks, however, the AI ​​rally has taken a breather, with some of the industry’s most prominent names losing ground. That’s not surprising, given the relentless run that began early last year. The news isn’t all bad. Most experts agree that we’re still in the early stages of AI adoption, so the rally likely has much further to go despite the recent pullback. This gives savvy investors an opportunity to invest in companies that still have room to grow.
Here are two AI-related stocks that have an additional upside potential of as much as 111%, according to select Wall Street analysts.
Palantir Technologies: Implied Upside of 854%
One of the bottlenecks to generative AI adoption is that many enterprises lack the expertise to implement the technology and still get the most bang for their buck. Given the complexity of the systems involved, this is not surprising. However, Palantir Technologies (NYSE: PLTR) has bridged the gap between knowledge and implementation.
The company has a long history of developing AI tools for the U.S. government and its allies, and expanded its mandate to help enterprises discover actionable intelligence from large amounts of enterprise data. This expertise allowed Palantir to move quickly to develop generative AI tools that enterprises could actually use. The result of these efforts is the company’s Artificial Intelligence Platform (AIP), which helps deliver solutions that make sense for everyday business problems.
Additionally, to address the resulting knowledge gap, management developed hands-on sessions it calls bootcamps, in which users are paired with Palantir engineers to create solutions to business-specific problems. This unmet need has attracted companies in droves, with 1,300 bootcamps since Palantir began hosting them late last year, including 500 in the past three months alone.
This is making for robust results. In the first quarter, Palantir’s commercial revenue in the U.S. grew 40% year-over-year, while the segment’s customer base grew 69%. More importantly, remaining deal value, which provides insight into future direction, grew 74%, suggesting growth will continue.
Wedbush analyst Dan Ives is the most bullish of his Wall Street peers, suggesting that Palantir shares will hit $50 by 2025, representing an 85% upside potential from Monday’s closing price. Ives believes these boot camps will continue to attract converts, boosting Palantir’s fortunes.
At 227 times earnings and 27 times revenue, Palantir looks frighteningly expensive. However, its forward price/earnings-to-growth (PEG) ratio, which takes into account accelerating growth, comes in at 0.3, while any number less than 1 is a underrated stock.
Super Micro Computer: Implied Upside of 115%
While Palantir helps companies harness the potential of AI, Supermicrocomputer (NASDAQ: SMCI)also known as Supermicro, makes advanced servers equipped with the computing power needed to bring AI to life.
As AI adoption has accelerated, many users are now looking to curb the massive energy consumption that results from AI processing. Supermicro’s focus on energy-efficient solutions is well-documented. Additionally, the company has a building block architecture that helps users create a system that best suits their needs. Supermicro offers a wide range of free-air, liquid cooling, and traditional air cooling technologies, ensuring there is a system for every budget.
During Supermicro’s fiscal third quarter of 2024, revenue increased 200% year-over-year to approximately $3.8 billion, while diluted earnings per share increased 329% to $6.56. The company is pushing hard to expand its production capacity to meet growing demand.
Shares of Supermicro have soared as much as 750% since the start of 2023, but some believe there’s much more potential ahead. Loop Capital analyst Ananda Baruah has a Street high price target of $1,500 and a buy rating on the stock. That represents a potential upside of 115% from Monday’s close.
The analyst is bullish on Supermicro’s “posture” in the AI ​​server industry, calling the company a leader in terms of both complexity and scale. Perhaps more importantly, Baruah believes Supermicro can generate $40 billion in revenue by the end of fiscal 2026. For comparison, Supermicro generated $7.1 billion in revenue in fiscal 2023 (ending June 30, 2023) and is on track to generate $14.5 billion in revenue for fiscal 2024. This suggests that there is still There is still plenty of potential for the future.
The analyst is not alone in his bullish opinion. Of the 17 analysts who gave an opinion in June, 12 rated the stock as a buy or a strong buy, and no recommended sales.
Finally, Supermicro stock is a bargain given the opportunity it represents, currently selling for 1.4 times expected revenue.
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Danny Vena has positions in Palantir Technologies and Super Micro Computer. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
2 Powerful Artificial Intelligence (AI) Stocks That Could Soar Up to 115%, According to Select Wall Street Analysts was originally published by The Motley Fool
