Three Promising Artificial Intelligence (AI) Companies Gearing Up for an Uptrend

Three Promising Artificial Intelligence (AI) Companies Gearing Up for an Uptrend

In the world of tech, one major trend that dominated the market last year was artificial intelligence (AI). Once relegated to the realm of science fiction, AI has now become a mainstream force. Businesses are racing to establish themselves as leaders in this space, viewing AI as a generational opportunity. Let's delve into three companies that are thriving in this AI-centric market.

Palantir Technologies

Known for its role as a U.S. government vendor, Palantir Technologies (PLTR 1.06%) has expanded its services to the commercial sector. Using AI, Palantir is now helping companies tackle their mission-critical needs. Instead of focusing on AI model development, Palantir has chosen to concentrate on the applications and workflow layers of AI software to enhance logic and functionality.

This strategy enables AI to perform better in real-life applications by connecting digital assets like data sets and models to their real-world counterparts, such as products or customer orders. Palantir's AI platform serves as the operational backbone of an organization, improving efficiency and productivity.

Palantir's U.S. commercial revenue skyrocketed 54% to $179 million in the last quarter while its U.S. commercial customer count surged 77%. The U.S. government, Palantir's primary customer, is also warming up to AI solutions. The success story for Palantir is largely due to its ability to convert proof-of-concept work into commercial revenue growth.

The company's valuation is a legitimate concern, with the stock trading at a 42 times forward price-to-sales ratio.

AppLovin

AppLovin (APP 8.15%) is another company that has seen substantial growth due to AI. AppLovin owns a portfolio of apps, but its true strength lies in its adtech solution. Its AI-powered Axon 2 solution has helped gaming apps attract and retain customers by targeting ads to users with high chances of downloading the app.

Axon 2's success is evident in AppLovin's software platform revenue, which increased 66% to $835 million in the last quarter. Even more impressive is the revenue growth being seen on top of the 65% growth it saw in Q3 2023.

AppLovin is looking to expand beyond gaming and has been piloting Axon 2 with e-commerce companies. The company expects Axon 2 to become a significant revenue contributor by 2025. The stock currently trades at a forward price-to-earnings ratio of 39.5 and a price-to-earnings-to-growth ratio of 0.63, which are attractive figures for growth stocks.

Broadcom

Semiconductor maker Broadcom (AVGO -1.17%) is making a splash in the AI chip market. Broadcom is working with customers to design custom AI chips for tasks such as AI training and inference. The company's first big customer in this area was Alphabet, which credited Broadcom's tensor processing units (TPUs) as a key differentiator to reduce inference processing times and lower costs.

Broadcom's custom chips are designed for specific tasks, outperforming graphics processing units (GPUs), which are more flexible but less efficient in certain tasks. For instance, Alphabet's TPUs are optimized for tensor operations within Google's Cloud's TensorFlow framework.

Broadcom is enjoying strong revenue growth from its custom AI chips, which surpassed $12 billion in fiscal 2024. With more customers adopting AI chip solutions, Broadcom is poised to reap the benefits of this burgeoning market. However, the stock currently trades at a forward price-to-earnings of 36.5, which is not cheap, considering its AI chip opportunity.

Sources:1. CNN Business2. Relevant 2024 Q4 Earnings Report3. The Motley Fool4. Markets Insider

1. Towards the end of last year, 'money' flowed into the AI sector as companies like Broadcom saw their custom AI chips bring in significant revenue.
2. For those interested in 'investing', Palantir's ability to convert proof-of-concept work into commercial revenue growth could be an appealing factor.
3. In the world of finance, AppLovin's stock currently offers attractive figures for 'growth stocks', driven by the success of its AI-powered adtech solution.
4. The surge in Palantir's revenue and customer count can be attributed to its intelligent use of 'AI', focusing on AI software applications and workflow layers.

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