Missed the alphabet? My best AI stock to buy and hold.

the alphabet (Google -1.13%) (The Google -1.08%)Google’s parent company continues to rely heavily on artificial intelligence (AI) and machine learning. AI charged Google’s self-proclaimed mission to “organize the world’s information and make it universally acceptable and usable,” putting it ahead of the competition. Hence, the technology deserves some credit for its market value of $1.3 trillion.

Investors can still find AI-driven opportunities in smaller growth stocks with huge potential. For those who feel they have missed out on the Alphabet growth story, they may want to take a closer look at it Palantir . techniques (PLTR -3.06%).

Palantir and AI

Palantir is a company that is not so much towards data but towards providing insights. Her most famous sight came with helping the CIA find Osama bin Laden. Big data companies like Trixwhich focuses on displaying data, or snowflakewhich manages and stores data, does not provide this.

Its core technology is Palantir Apollo, a Software as a Service (SaaS) application that helps build, deploy, and secure software platforms in one or several environments. It also supports two Palantir operating systems: Palantir Gotham, which provides insights into military and law enforcement challenges, while Palantir Foundry applies this knowledge to opportunities in the commercial sector.

Palantir describes AI as “a technology that looks for a problem,” but it still managed to find applications for this capability. One application involves applying their models to an end-to-end infrastructure. He can create what he calls micro-models to solve smaller problems and link their models to identify solutions on a larger scale. This allows Palantir to perform analyzes on a single part of the system without compromising the overall workflow.

Moreover, AI can build models based on secure data. This approach ensures both data integrity and the ability to link and apply data to the problem at hand.

Palantir shares and its financial statements

But despite this potential, the SaaS stock It’s down more than 80% from its high in early 2021. It’s not just the tech bear market and the uncertain path to profitability that has weighed on stocks. Limited potential clients in the military and law enforcement field have led to an increased focus on commercial clients.

But cost sensitivity could become a more important issue. Foundry’s subscription costs $1M per month plus additional fees AmazonAWS Marketplace. This massive cost can result in many commercial customers reducing their use of the software, resulting in uncertainty in commercial revenue streams.

The stock’s decline has reduced its market capitalization to $17 billion. This makes it less than 2% of Alphabet’s volume, which gives investors a chance to buy while the stock is barely in highly capitalized territory.

Also, revenue of $919 million for the first half of 2022 was a 28% year-over-year increase. While this lags slightly behind the 41% revenue increase in 2021, it keeps it in line with the company’s target of 30% annual revenue growth through 2025.

Furthermore, commercial revenue increased by 46% in the second quarter, and the number of commercial customers increased by 250% during that period. This may mean that the cost of a foundry may be less significant than many fear.

It supports a price-to-sales (P/S) ratio of 9. Although still well above the Alphabet’s P/S of 5, Palantir’s sales multiplier is near an all-time low. Assuming revenue growth continues at the target level, this assessment could indicate a buying opportunity.

Palantir is a potential second chance for AI-driven growth

Palantir’s focus on providing insight means that AI plays a critical role in delivering results for its clients. Admittedly, the need to shift its focus from government to commercial clients brings uncertainty, and investors may not view its continuing losses favorably in a bear market.

It is also still not clear whether the stock has been made finally. But the revenue growth from its commercial side shows that the company is gaining momentum with its commercial customers. With Palantir remaining on track to maintain ambitious revenue targets, a position in this company could generate significant returns as economic conditions improve.

Susan Fry, CEO of Alphabet, is on the board of The Motley Fool. Will Healy He has positions in Palantir Technologies Inc.. Motley Fool has positions in Alphabet (A shares), Alphabet (C shares), Alteryx and Palantir Technologies Inc. and Snowflake Inc. Disclosure Policy.

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