Palantir (NYSE:PLTR) currently shines in the limelight due to its five consecutive profitable quarters, indicating a promising future compared to other struggling artificial intelligence (AI) stocks. The issue of underperformance is prevalent in AI investing, with many companies resorting to superficial tactics such as leveraging buzzwords or hastily integrating an OpenAI ChatGPT wrapper into inadequately planned products, dubbing it as “innovation.”
Identifying the next Palantir within the realm of AI stocks poses a challenge. However, by emulating Palantir’s strategies, investors can navigate this landscape more effectively. It is advisable to focus on companies operating in specialized sectors that offer unique value propositions to customers and possess the agility to expand their clientele base.
In the case of Palantir, the company’s core mission revolves around destigmatizing data silos to extract insights that drive decision-making processes. Initially concentrated on government contracts, Palantir is now diversifying its reach towards commercial dominance.
Applying a similar analytical approach to other AI stocks can unveil potential candidates that mirror Palantir’s trajectory.
Chegg (CHGG)
Chegg (NYSE:CHGG) emerges as a standout player among AI stocks, positioning itself as the next Palantir in the realm of Education Technology (EdTech). Transitioning from its origins in textbook rentals, Chegg has evolved into a comprehensive platform integrating AI for homework aid and personalized learning resources. These advancements signify a future where AI plays a pivotal role in everyday educational practices. Similar to Palantir, Chegg leverages AI to provide tailored solutions to end-users, be it educational institutions or individual students.
Despite facing setbacks in 2023, characterized by a 7% decline in revenue year-over-year and diminishing subscription rates, Chegg is recalibrating its operational focus. As it shifts away from the research and development phase, the company anticipates a surge in its already impressive 68% gross margin, with Q1 expected to reach around 74%. This trajectory is commendable for a small-cap AI stock carving its niche in the market.
Chegg distinguishes itself among AI stocks through its shareholder-friendly endeavors, notably its $200 million share repurchase program. This initiative underscores Chegg’s ability to balance aggressive AI-driven growth with financial stability across its diverse business segments.
UiPath (PATH)
UiPath (NYSE:PATH) emerges as the next Palantir in the domain of office administration. While seemingly less glamorous, UiPath shares a common endorsement with Palantir as one of Cathie Wood’s preferred stocks. Analogous to Palantir, Cathie Wood perceives UiPath as a sound investment due to its capacity to unlock and operationalize vast amounts of accumulated data within companies.
Wood advocates for a software-centric approach to AI investing, emphasizing the significance of software over hardware expenditure. She highlights the prevalence of proprietary data in their investment portfolio, with UiPath possessing exclusive data from numerous global companies, facilitating the automation of mundane processes.
Investors echo the sentiment regarding UiPath’s potential among AI stocks, citing the integration of Generative AI into its expanded automation platform, driving substantial enterprise adoption. This mirrors Palantir’s strategic shift towards catering to enterprise clients, diversifying away from exclusive government contracts.
SoundHound AI (SOUN)
SoundHound AI (NASDAQ:SOUN) emerges as a burgeoning small-cap AI stock poised for significant growth. The company pioneers AI applications in voice recognition, particularly in optimizing order flows within restaurant operations through AI voice assistance. Voice recognition, though a niche field, presents ample growth opportunities, as demonstrated by AI stocks like SOUN expanding their market reach through adaptable technology solutions.
The recent multimillion-dollar investment by AI giant Nvidia (NASDAQ:NVDA) underscores SoundHound’s potential for exponential growth. Nvidia’s strategic stake in SoundHound follows previous investments, indicating a longstanding interest in the company’s trajectory even before the current AI boom.
Continued support from Nvidia positions SoundHound favorably among AI stocks, potentially positioning it as the next Palantir in voice recognition software.
Jeremy Flint, an accomplished finance writer and MBA graduate, specializes in content strategy for wealth management and investment sectors. His expertise lies in simplifying intricate market concepts, with a focus on fixed-income investments, alternative assets, economic analysis, and the oil, gas, and utilities industries. For more of Jeremy’s work, visit www.jeremyflint.work.
