If you missed the big wave at Nvidia this year, don’t get too upset just yet.
The artificial intelligence story is far from over: 2025 could mark a new chapter as the spotlight shifts from hardware titans like Nvidia (NVDA) for software disruptors.
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While Nvidia fueled the AI engines with its chips, software giants are ready to power those engines, allowing companies to use this data effectively.
“Now the time has come for the broader software space to join the AI party as we believe the use cases are exploding,” Wedbush analysts led by Daniel Ives wrote in a Dec. 26 report. “The corporate consumption phase is ahead of us. starting in 2025.”
AI monetization may bring a new growth story.
“The launch of LLM (major languages) models across the board, and the actual adoption of generative AI will be a major catalyst for the software sector and key players to take advantage of this. This fourth industrial revolution, once in a generation , will benefit the tech space,” Wedbush wrote.
Which companies could benefit most from this major shift? Palantir (PLTR) and Salesforce (CRM) said Ives.
Palantir joined the Nasdaq 100 Index on December 23 and is now one of the index’s best performing constituents this year.Bloomberg/Getty Images
Palantir Technologies is a market darling in the field of artificial intelligence and data analytics. The share price has quadrupled this year.
The surge in Palantir’s shares is driven by the company’s growing role in AI and increased demand for the technology and its applications.
Related: Here’s what a veteran trader who predicted Palantir’s stock rally is saying now
Palantir solutions allow governments and enterprises to quickly and securely discover patterns and uncover key insights in large data sets.
Palantir’s largest customer is the US government. It also makes money from big companies, such as European giant Airbus (EASY) which produces aircraft, and German healthcare giant Merck KGaA.
There’s plenty of government activity to do, but enterprises are expected to be the main catalyst behind IT spending by 2025, Wedbush said.
“Palantir has been a key focus during the AI revolution, expanding the use cases for its major products, resulting in a larger partner ecosystem with rapidly increasing demand across the landscape for enterprise-scale, enterprise-ready generative AI,” said Wedbush.
“This will be a key growth driver for U.S. commercial operations over the next 12 to 18 months as more enterprises follow the AI path with Palantir,” the company added. “Palantir has a credible path to transforming into the next Oracle over time. Over the next decade, AIP will lead the way as many on the street remain major skeptics of AI’s Messi.”
Palantir joined the Nasdaq-100 Index on December 23 and is now one of the best performing components of the index this year.
In November, the company posted quarterly results and expectations that were well above Wall Street expectations. Earnings per share of 10 cents were higher than the 9 cents Wall Street had expected. Revenue of $726 million also surpassed the consensus estimate of $701 million, up 30% from a year ago.
“We absolutely gutted this quarter, driven by relentless demand for AI that won’t slow down,” CEO Alex Karp said in the earnings release.
“Our business growth is accelerating and financial performance is exceeding expectations,” he added.
Related: Analysts sound alarm about Palantir stock in 2025
Wedbush has an outperform rating and a $75 price target on Palantir. The stock closed at $79.08 on December 27, down 3.7%.
Despite Palantir’s promising growth trajectory, its high valuation has raised red flags among some analysts.
In December, UBS and Baird initiated equity coverage with neutral ratings, highlighting valuation concerns as a key factor in their cautious stance.
The stock’s forward price-to-earnings ratio is 163. The forward price-to-earnings ratio for the Standard & Poor’s 500 index is approximately 24.
As the AI revolution enters the software phase, Salesforce is well positioned to capture its share of the market expansion, a $7 trillion opportunity in the digital labor market, Wedbush said.
Salesforce uses AI agents to help companies connect with customers.
On December 17, Salesforce unveiled Agentforce 2.0, its latest digital workforce platform that “makes autonomous AI part of every team, allowing every employee to collaborate with Agentforce in Slack.”
Agentforce’s customers include IBM (IBM) Finnair, Accenture (ACN) and Heathrow Airport. They use the platform to expand their teams, streamline their operations and unlock new growth opportunities.
“Agentforce 2.0 aims to enable AI to perform advanced actions for humans with increased layers of trust built in for agents, paving the way for a new era of digital work,” said Wedbush.
Salesforce reported fiscal third-quarter results on December 3. Sales exceeded expectations, but profits lagged slightly.
Adjusted earnings per share were $2.41, just below Wall Street’s estimate of $2.44. Revenue rose 8% year over year to $9.44 billion, beating the forecast of $9.34 billion.
The company also raised the lower end of its fiscal 2025 revenue guidance and now expects $37.8 billion to $38 billion. Salesforce’s stock price rose 11% the next trading day.
Chief Executive Marc Benioff highlighted Salesforce’s momentum in artificial intelligence, particularly the Agentforce platform.
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“This is a bold step into the future of work, where AI agents empower humans to unite to transform all our customer interactions,” said Benioff.
Wedbush is bullish on Salesforce stock in 2025.
“We believe CRM is a clear secondary beneficiary of the AI revolution, which could add ~$80 per share to the CRM story as this monetization story takes shape over the next twelve to eighteen months,” Wedbush said .
The company has a price target of $425 and an outperform rating on Salesforce stock, which closed at $338.45 on December 27. Shares are up 28.6% this year.
Related: Veteran fund manager makes alarming S&P 500 predictions
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