Artificial intelligence (AI) has incredible potential to transform industries. Some have compared AI to the greatest transformational technology since the internet.
Many companies are trying to take advantage of this The secular trend of AI. Being two Palantir Technologies (NYSE:PLTR) And C3.ai (NYSE:AI). The former uses AI to extract insights from data, and the latter provides organizations with ready-made and customized AI software.
The AI market is expected to grow rapidly from a projected $184 billion this year to $827 billion by 2030. Given this growth, is Palantir or C3.ai the better long-term AI investment? Here’s a look at each to come to a conclusion.
Palantir has been helping the US government analyze data since 2003, but only launched its artificial intelligence (AIP) platform in 2023. From its inception, AIP helped drive the expansion of Palantir’s non-governmental activities.
In the second quarter, Palantir saw revenue growth of 33% year over year to $307 million in its commercial division. This helped the company’s revenue reach $678 million in the second quarter, up 27% from the previous year.
Not only is Palantir’s revenue growing, but its financial health is also excellent. The company ended the second quarter with net income of $135.6 million, up from $27.9 million in 2023. It also had second quarter adjusted free cash flow (FCF) of $149 million, up from $96 million from the previous year.
AIP has successfully attracted commercial customers because the platform enables companies to go from an AI concept to real-world implementation in just a few days. This capability is no small feat, and according to Palantir CTO Shyam Sankar, “therein lies our entire opportunity in the market.”
Following on from AIP’s success, Palantir introduced a new product built on AIP called Warp Speed. This solution aims to address bottlenecks in the manufacturing industry by using AI to improve an organization’s supply chains and production processes.
If Palantir can successfully tackle this huge market, which represented nearly $3 trillion in US gross domestic product (GDP) last year, it could fundamentally transform its fortunes.
C3.ai started as an energy management company in 2009 and moved into AI software in 2019. Thanks to its roots in the energy sector, the company was able to form a joint venture with energy giant Baker Hughes to deliver AI technology to the oil and gas sector. This allowed C3.ai to capture customers such as Shell And ExxonMobil.
C3.ai’s software platform can address several situations where AI can help a business, such as fraud detection for banks. The company generated 84% of its revenue from subscriptions in its first fiscal quarter of 2025, which ended July 31. The rest came from services such as training and customer support.
The demand for AI led to rapid revenue growth for the company. In the first fiscal quarter, revenue was $87.2 million, up 21% year over year. This extends the double-digit revenue growth that C3.ai experienced in fiscal 2024, when revenue reached $310.6 million, up 16% year over year.
The company also produced first-quarter FCF of $7.1 million, a substantial improvement over last year’s negative FCF of $8.9 million. Yet C3.ai is not profitable. Net loss for the first quarter was $62.8 million.
Additionally, the company’s contract with Baker Hughes expires in April 2025. This is an important relationship for C3.ai, with some estimates suggesting Baker Hughes accounts for more than a third of C3.ai’s revenue.
Choosing Palantir or C3.ai as the better investment is not easy. While both are seeing strong revenue growth, C3.ai’s lack of profitability seems to make Palantir the better AI company to invest in. Still, Palantir’s success has sent its share price soaring, with shares skyrocketing more than 150% in the past twelve months.
Right now, the company’s shares look quite pricey when you compare the price-to-sales ratio (P/S) with C3.ai. The P/S ratio tells you how much investors should pay per share for a dollar of earnings.
Wall Street agrees. The consensus among Wall Street analysts is a “hold” rating with an average price target of $28 for Palantir stock. Given that the stock is trading at around $43 at the time of this writing, Wall Street’s price target signals a belief that Palantir stock is overpriced.
That said, C3.ai is far from a purchase. Like Palantir, the consensus among Wall Street analysts is a “hold” rating for C3.ai stock, with an average price target of $22.
In addition, there is the uncertainty surrounding the extension of the collaboration between C3.ai and Baker Hughes. Consequently, any decision on purchasing C3.ai shares should be postponed until this partnership situation is resolved.
Without Palantir’s sky-high valuation, it would be the better AI investment over C3.ai, given AIP’s superior financial results and the success and future potential of Warp Speed. But for now, it’s best to wait for a drop in Palantir’s stock price before deciding to buy.
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Robert Izquierdo holds positions at Palantir Technologies. The Motley Fool holds positions in and recommends Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
Better Artificial Intelligence Stock: Palantir vs. C3.ai was originally published by The Motley Fool
