Is artificial intelligence (AI) all the hype? The lackluster past few weeks for AI stocks has some investors wondering and worrying.
This week, three Motley Fool contributors investigate Palantir Technologies (NYSE:PLTR), snowflake (New York Stock Exchange: Snow)and Nvidia (NASDAQ:NVDA) To explain why they think these stocks are down from their recent highs, but still far from their highs.
Palantir stock is taking a much-needed breather.
Justin Pope (Palantir Technologies): Investors have been hearing a lot about AI over the past year, and there are signs that Palantir's Artificial Intelligence Platform (AIP) deserves to be part of the conversation.
The government is also showing signs of this, with Palantir continuing to win contracts. Recently, he was awarded a $9.8 million contract from the U.S. Defense Information Systems Agency, and from the Army he was awarded a $178 million contract.
They're also popping up in the private sector, where Palantir's customer growth is accelerating. US commercial customer numbers increased 55% year-over-year in the fourth quarter and 22% sequentially. This was an increase from the 37% year-over-year increase in the third quarter.
There are also positive signs in the corporate sector, with Palantir just recently oracle To distribute Palantir's AI technology on a cloud platform.
When there is demand from so many different parties, you can feel pretty good about the quality and impact of your platform. There is still a lot of room for growth in the long term. Palantir still only has about 500 customers, a small portion of the broader enterprise market.
Technology stocks have fallen in recent days as the market realizes that interest rates may remain high for longer than expected. This has sent Palantir stock down to the high to low $20s, and investors should welcome the respite as a buying opportunity.
Analysts expect the company's profits to grow at a compound annual rate of 26% over the next three to five years, just the latest in decades of double-digit growth.
This data cloud stock is unlikely to remain frozen for long periods of time
Will Healy (Snowflake): Snowflake has emerged as an increasingly essential data cloud platform. Data clouds allow businesses to store, protect, and manage their data from one central location.
Snowflake has a competitive advantage because it can work with a variety of cloud providers. This makes our competitors: Amazon Sometimes we also promote our own data cloud products.
With this approach, Snowflake had more than 9,400 customers at the end of fiscal year 2024 (ending January 31), a 22% increase over the prior year. Of those, 461 spend more than $1 million annually on the platform, and this cohort has grown by 39% over the same period.
Additionally, you can earn money based on your usage. This will increase your revenue from your current customers. This business model may have helped Warren garner interest from his Buffett team prior to the initial public offering (IPO). berkshire hathaway.
However, the stock price has fallen in recent weeks. It probably didn't help that the FY2025 sales growth forecast was 22%, lower than usual, but the most influential reason is probably the 2020 IPO and the CEO who led the company in the years that followed. (CEO) Frank Slotman's sudden retirement. .
Additionally, new CEO Sridhar Ramaswamy only came to Snowflake last year through the acquisition of Neeva, the search company he founded. If that happens, the company's direction may become even more uncertain.
Nevertheless, the low earnings forecast and Mr. Ramaswamy's technical background could lead to a better-than-expected performance later on. Investors should also remember that the company is still growing rapidly. Sales for fiscal year 2024 were $2.8 billion, an increase of 36% from the previous year.
Additionally, adjusted free cash flow for fiscal 2024 was $810 million. This is an increase of 56% from the prior year, mitigating the negative impact of a net loss of $836 million driven primarily by increased non-cash, stock-based compensation expense. cost.
Finally, the dramatic decline in the stock price has pushed the price to sales (P/S) ratio below 18, the lowest level in the stock's history. As more companies seek interoperable data cloud products, these levels are likely to encourage a buy in Snowflake stock.
Nvidia is still firing on all cylinders
Jake Larch (Nvidia): As AI stocks soar, Nvidia is undoubtedly at the forefront. Over the past 18 months, the company's stock price has risen more than 436%. This means that if he invested $10,000 in November 2022, he would now be worth $53,600.
However, things were different last month. With the stock in a neutral position, investors are wondering if Nvidia's bulls are asleep or completely dead.
I think the bull still has a lot of life left in it. First, tThe AI revolution is still in its early stages.Just last week, a chip manufacturer taiwan semiconductor manufacturing It raised its forward guidance based on “insatiable demand” for AI chips. This is not a comment that suggests demand is slowing, but rather evidence that organizations continue to increase their AI spending.
And secondly, Nvidia's new AI chips are coming. In his March, the company announced a new generation of AI chips known as Blackwell or GB200. These chips are an upgrade to the Hopper generation of AI chips, which are already the most popular on the market. The first Blackwell chips won't ship until later this year, but once they do, they should boost Nvidia's already impressive sales.
That means overall demand for Nvidia's AI products and chips remains high. At the same time, the company is rolling out the new and improved GB200, which should further increase revenue and profits. Therefore, long-term investors should maintain this policy. The future is still bright.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Jake Lerch has positions at Amazon and Nvidia. Justin Pope has no position in any stocks mentioned. Will Healy has held positions at Berkshire Hathaway, Palantir Technologies, and Snowflake. The Motley Fool has positions in and recommends Amazon, Berkshire Hathaway, Nvidia, Oracle, Palantir Technologies, Snowflake, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
“Down but Far From Out: 3 Artificial Intelligence (AI) Stocks to Buy and Hold Forever” was originally published by The Motley Fool.
