What Is One of the Best Artificial Intelligence (AI) Stocks to Hold for the Next 5 Years?
Key Points
The company is seeing significant growth in contract values and revenue.
There is enormous potential for Palantir to expand its addressable market over the long term.
- 10 stocks we like better than Palantir Technologies ›
Companies are investing more in cutting-edge artificial intelligence (AI) tools to accelerate workflows, gain deeper insights from their data, and make informed, profitable decisions to drive business growth. AI is in the early stages of transforming how businesses operate, and Palantir Technologies (NASDAQ: PLTR) is at the epicenter of this megatrend.
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Palantir is becoming an AI stalwart
Palantir has experienced accelerating demand for its AI platforms this year. It is closing larger deals in its U.S. commercial business faster than ever. In the third quarter, the total contract value for all deals across its government and corporate segments grew 151% year over year to over $2.7 billion. Management expects fourth-quarter revenue to increase 61% year over year to exceed $1.3 billion, with nearly $700 million in adjusted operating profit.
Many investors may recognize Palantir's strong growth and high margins as attractive investment qualities, but they often get hung up on the company's expensive valuation. This is the most expensive large-cap stock, currently trading at 58 times next year's revenue estimates.
However, Palantir profits from technology that is becoming exponentially smarter every year. It isn't easy to model the value of a company experiencing accelerating demand, particularly as Palantir expands the revenue potential of its AI platforms. Palantir will likely broaden its addressable market with new applications for its software as AI advances.
For example, Palantir is developing technology to integrate AI agents into complex industrial and operational environments. This positions Palantir as an automated operating system for entire industries, enabling supply chains to run automatically in the background. This means that Palantir's long-term addressable market may extend well into the trillions. For this reason, I believe the stock remains one of the best AI stocks to buy and hold, not just for the next five years but for the next 20 years.
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John Ballard has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
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