Artificial intelligence (AI) stocks have been surging lately, and for good reason. This exciting technology is already driving massive revenue growth for companies that make AI products and services, and customers are investing in these tools because of AI’s promise to revolutionize their businesses. For example, AI can accelerate the development of new and better medicines or make vehicles safer and easier to operate.
Investors who recognized this promise have flocked to AI stocks, helping these players S&P 500 index is up nearly 20% year to date. While companies in the AI sector have seen their stocks soar, it’s not too late to get in on many attractive players. In fact, it’s a good time to invest in two of them. I predict that these AI companies are poised for tremendous growth. Let’s take a look at them.
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1. Palantir Technologies
Palantir Technologies (NYSE: PLTR) helps its clients capture and use their complex web of data — so they can integrate it into their strategies and harness its power to make critical decisions. For most of its history, the 20-year-old company has relied on government contracts to fuel revenue growth. But lately, a new growth engine has emerged.
Palantir’s commercial business has taken off, helped by the company’s investment in AI. Last year, Palantir launched its Artificial Intelligence Platform (AIP), an AI-powered system that helps customers quickly drill down into their data and figure out how it can help them achieve their business goals. The company even came up with a genius way to sell the platform to potential customers by hosting bootcamps that give them a taste of what it can do.
And the long-established company’s new bet is paying off. AIP is boosting revenue in both government and commercial businesses — and commercial is now the fastest-growing industry. In the most recent quarter, commercial revenue in the U.S. grew 55 percent, compared with a 24 percent gain in U.S. government revenue. Palantir had just 14 commercial customers four years ago, and now it has nearly 300, illustrating the progress made in a short period of time.
The relatively recent launch of AIP, the high demand for the platform, and the commercial numbers we’ve seen so far suggest that explosive growth is on the horizon for Palantir. And that means the stock has plenty of room to grow over the long term, even after recent gains.
2. Supermicrocomputer
Supermicrocomputer (NASDAQ: SMCI) is a major behind-the-scenes player in the world of AI. The company makes the equipment that is critical to the operation of AI data centers, from workstations to full rack-scale solutions. Supermicro is not the only equipment maker, but it has managed to grow five times faster than the industry average over the past 12 months.
The reason for the company’s success? It works hand in hand with the world’s best chip designers — including market leader Nvidia — to integrate their innovations directly into their products. Supermicro’s building block technology — where most products contain similar components — also drives speed. So customers know they can quickly get a custom product for their data centers with the latest technology when they order from Supermicro.
This has led to tremendous growth for the equipment company, with quarterly revenue this year even surpassing its annual revenue in 2021. In the most recent quarter, revenue was $5.3 billion, up more than 140% year-over-year.
What’s more, a new wave of growth could be on the horizon. Supermicro is well-positioned to solve one of the biggest problems facing AI data centers: heat buildup. This is thanks to the company’s Direct Liquid Cooling (DLC) technology. Supermicro says that as many as 30% of new data centers will be equipped with DLC in the next 12 months — and Supermicro will dominate that market.
I therefore predict that this equipment giant, which has already shown growth, is heading for a new wave of continued revenue growth. That is reason to be optimistic about the stock price in the long term.
Should You Invest $1,000 in Palantir Technologies Now?
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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.