Can C3.ai become the next Palantir technology?

Palantir Technologies (NASDAQ:PLTR) The stock was in strong shape in 2024 as investors showed growing interest in the software platform specialist thanks to strong demand for the company’s artificial intelligence (AI)-focused offerings, which led to significant accelerations in its growth in turnover and results.

As of this writing, the stock is up 380% this year and now trades at an extremely rich valuation. With a price-to-sales ratio of 75 and an earnings multiple of 412, Palantir is not an ideal candidate for investors looking to buy an artificial intelligence (AI) stock at a reasonable valuation.

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Of course, the forward earnings multiple of 217 indicates that the company’s financial results are expected to improve remarkably over the coming year, but this high valuation also means that any signs of weakness in Palantir’s growth could do drop the title. There’s a good chance Palantir can sustain its impressive long-term growth given the lucrative AI software platform market it serves, but it remains a risky investment.

Those looking for a more reasonably priced business and trying to capitalize on this opportunity might consider C3.ai (NYSE:IA). Its stock has posted more modest gains of 23% in 2024 and has recently been in the news for the wrong reasons. But it also trades at significantly lower valuations than Palantir and operates a similar addressable market. As such, now would be a good time to ask whether C3.ai can follow in the footsteps of its larger peers and deliver eye-popping gains for investors.

There’s plenty of room for growth in AI software

According to market research firm IDC, the AI ​​software platform market generated $28 billion in revenue in 2023. The firm predicts that this market could be worth a whopping $153 billion by 2028, meaning there is room for more than one business to thrive in this sector. this space. So far, Palantir and C3.ai are only scratching the surface of a huge opportunity.

Palantir’s revenue over the last four reported quarters was $2.65 billion. C3.ai, on the other hand, generated $325 million. More importantly, both companies have seen their growth rates increase since the start of 2023.

PLTR Earnings Data (TTM) by YCharts.

Additionally, both companies reported almost identical growth rates in their most recent quarters. While Palantir’s revenue grew 30% year-over-year to $726 million in the third quarter of 2024, C3.ai’s revenue jumped 29% year-over-year. ‘other to reach $94 million during its second quarter of fiscal 2025, which ended October 31.

Both also increased their full-year revenue forecasts as demand for their generative AI software solutions grew among commercial and government customers. It’s worth noting that Palantir initially made its name providing software platforms and analytics solutions to U.S. government agencies, but has recently focused on conquering more commercial customers in the field of enterprise AI software.

A similar story is unfolding at C3.ai. The company has “entered into new and expanded agreements with the U.S. Department of Defense, U.S. Air Force, U.S. Navy, U.S. Army, U.S. Marine Corps, Defense Logistics Agency and Chief Digital Artificial Intelligence Office, among others.” ” said CEO Tom Siebel during the latest earnings conference call.

Meanwhile, C3.ai has partnered with major cloud service providers such as Microsoft, Amazonand Google to ensure broader reach for the more than 100 enterprise AI applications it offers. The company also offers an enterprise AI application development platform that allows customers to build their own solutions, in addition to industry-specific solutions that help customers integrate generative AI into their operations .

In short, the company appears to be positioning itself to make the most of the massive addressable opportunity in the AI ​​software market. But will that be enough for it to succeed to the same degree as Palantir?

Strong growth is expected for both companies

C3.ai is currently a much smaller company than Palantir. However, its revenue growth was almost the same as Palantir’s last quarter, and both companies have seen an uptick in growth over the past two years.

Additionally, both companies plan to announce a 25% increase in revenue in the current fiscal year. Palantir’s revenue is expected to reach $2.79 billion in 2024, while Palantir is expected to generate $388 million in revenue in the current fiscal year. Analysts also expect robust double-digit growth over the next two years.

PLTR revenue estimates for next fiscal year data by YCharts.

Better yet, analysts have increased their growth expectations from both companies. This is not surprising given the size of the markets they serve, and there is a good chance that their growth prospects will continue to improve as adoption of generative AI software increases.

So while C3.ai is expected to remain a smaller company than Palantir over the next couple of years, its strong growth and end-market opportunities make it an ideal alternative for anyone looking to take advantage of the growing mobile phone market. AI software today. a reasonable valuation.

After all, C3.ai’s 13x sales multiple is less than a fifth of that of its larger peer, even though their growth rates are nearly equal. That’s why investors looking for the next Palantir would do well to keep C3.ai on their watchlists or buy it now, as its improving growth profile could lead to healthy stock price gains .

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the securities mentioned. The Motley Fool holds positions and recommends Amazon, Microsoft and Palantir Technologies. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.