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Do you have $25? You could be buying one of the best artificial intelligence (AI) stocks on the market

Some of the most talked about artificial intelligence (AI) stocks such as Nvidia or Super microcomputer are approaching $1,000, making them unaffordable for many investors who don’t have access to fractional shares. Fortunately, another top AI stock is worth less than $25, and investors should consider this if they want to increase their exposure to AI without overweighting their portfolio towards a single company.

Palantir Technologies (NYSE:PLTR) is a great AI investment and can be purchased for less than $25. But is now the right time to buy?

Palantir’s new AI product is taking the US by storm

Palantir has been in the AI ​​business much longer than many of its peers. As a result, the company has developed years of experience that others cannot reproduce.

Originally developed for government use, Palantir’s AI product line was deployed to ingest massive data streams and give executives the best possible information to make real-time strategic decisions. Ultimately, this software was expanded beyond government use, greatly expanding Palantir’s market opportunity.

Those products are about AI in the traditional sense of the word, but the AI ​​most people are talking about today is different from the AI ​​of yesterday. When most people mention AI now, they’re talking about generative AI, the technology behind products like ChatGPT. This is a powerful branch of AI with many use cases, but its integration into internal systems is not the easiest.

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However, Palantir’s AIP (Artificial Intelligence Platform) helps its customers do just that.

AIP gives developers the tools they need to integrate AI into all levels of a business and use proprietary data without fear of that information leaking into the public domain. With tools to implement AI within a business, it has become an incredibly popular product. Chief Revenue Officer Ryan Taylor stated in Palantir’s fourth-quarter earnings conference call, “I have never before seen the level of customer enthusiasm and demand that we are currently seeing at AIP in the U.S. commercial sector.”

With AIP booming in the US commercial sector, it will provide a significant boost to Palantir’s finances.

Palantir’s business is doing well

In the fourth quarter, U.S. commercial revenues rose 70% year-over-year to $131 million. While this is an impressive result, it still doesn’t make up the majority of Palantir’s revenue. Government revenues still make up the bulk of Palantir’s business, as they top out at $324 million of the $608 million total.

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US commercial operations represent less than half of total commercial revenues, while Palantir brought in $284 million worldwide. But if corporate America can maintain its growth rates (which should be possible given strong demand for AIP), the tables could turn later in the year.

Unlike many software companies, Palantir has placed an emphasis on running a profitable business. Palantir made a profit in every quarter of 2023, and the fourth quarter was its most profitable period yet.

PLTR Profit Margin Chart (Quarterly).

PLTR Profit Margin Chart (Quarterly).

However, this business success and improving profitability come at a price, as Palantir’s stock is far from cheap from a valuation perspective.

PLTR PE ratio (forward) chartPLTR PE ratio (forward) chart

PLTR PE ratio (forward) chart

Palantir trades at a hefty price-to-earnings (P/E) ratio, which makes sense because the company is unlikely to reach peak profitability in 2024. The price-to-earnings ratio of 23 is also very expensive, especially considering Palantir stock. overall sales growth was 20% in the fourth quarter.

If Palantir wants to maintain this premium valuation, it must grow its government revenues and maintain commercial growth levels in the US. If you succeed, the premium will be worth it.

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But if you’re looking for a little exposure to the AI ​​space at a cheap share price, there are few better stocks than Palantir. While the shares are expensive, that’s because there are a lot of expectations that Palantir will succeed. If it can maintain these great results over the next three or five years, the premium you pay today could be worth it years down the road because of the growth.

Should You Invest $1,000 in Palantir Technologies Now?

Before you buy shares in Palantir Technologies, consider the following:

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Keithen Drury has no positions in the stocks mentioned. The Motley Fool holds positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

Do you have $25? You Could Buy 1 of the Best Artificial Intelligence (AI) Stocks on the Market Originally published by The Motley Fool

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