Higher Synthetic Intelligence Inventory: Palantir vs. C3.ai

Synthetic intelligence (AI) holds unbelievable potential to alter industries. Some have likened AI to the most important transformational expertise because the web.

Loads of firms try to capitalize on AI’s secular trend. Two are Palantir Applied sciences (NYSE: PLTR) and C3.ai (NYSE: AI). The previous makes use of AI to derive insights from information, and the latter offers organizations with turnkey and customized AI software program.

The AI market is predicted to broaden quickly from a projected $184 billion this yr to $827 billion by 2030. Given this progress, is Palantir or C3.ai the higher AI funding for the lengthy haul? Here is a have a look at every to succeed in a conclusion.

The case for Palantir

Palantir has been serving to the U.S. authorities analyze information since 2003, but it surely simply launched its synthetic intelligence platform (AIP) in 2023. With its inception, AIP helped to spur the enlargement of Palantir’s non-government enterprise.

Within the second quarter, Palantir skilled 33% year-over-year gross sales progress to $307 million in its business division. This contributed to the agency’s Q2 revenue reaching $678 million, a 27% bounce up from the earlier yr.

Not solely is Palantir’s income rising, however its monetary well being can be wonderful. It exited Q2 with a internet earnings of $135.6 million, up from $27.9 million in 2023. It additionally boasted Q2 adjusted free cash flow (FCF) of $149 million, a rise from the prior yr’s $96 million.

AIP efficiently attracted business clients as a result of the platform permits companies to go from an AI idea to real-world implementation in as little as a couple of days. This means is not any small feat, and based on Palantir’s CTO, Shyam Sankar, “therein lies our total alternative available in the market.”

As a follow-up to AIP’s success, Palantir launched a brand new product constructed on AIP known as Warp Velocity. This answer is supposed to deal with bottlenecks within the manufacturing trade by leveraging AI to enhance provide chains and a company’s manufacturing processes.

If Palantir can efficiently sort out this huge market, which represented practically $3 trillion in U.S. gross domestic product (GDP) final yr, it may essentially rework its fortunes.

A have a look at C3.ai

C3.ai started in 2009 as an power administration firm and transitioned to AI software program in 2019. Its power trade roots enabled the agency to type a three way partnership with power big Baker Hughes to ship AI tech to the oil and gasoline sector. This allowed C3.ai to seize clients similar to Shell and ExxonMobil.

C3.ai’s software program platform can tackle varied conditions the place AI may also help a enterprise, similar to fraud detection for banks. The corporate generated 84% of its income from subscriptions in its 2025 fiscal first quarter, which ended July 31. The rest got here from companies similar to coaching and buyer help.

AI demand led to speedy income progress for the corporate. In its fiscal Q1, gross sales hit $87.2 million, a 21% year-over-year improve. This extends the double-digit income progress C3.ai loved in its 2024 fiscal yr when gross sales reached $310.6 million, a 16% year-over-year improve.

The agency additionally produced Q1 FCF of $7.1 million, a considerable enchancment over the prior yr’s unfavorable FCF of $8.9 million. But, C3.ai shouldn’t be worthwhile. Its Q1 internet loss totaled $62.8 million.

As well as, the corporate’s partnership with Baker Hughes is contracted to finish in April 2025. This can be a key relationship for C3.ai, with some estimates suggesting Baker Hughes accounts for over a 3rd of C3.ai’s income.

Deciding between C3.ai and Palantir

Selecting Palantir or C3.ai as the higher funding is not simple. Whereas each get pleasure from robust income progress, C3.ai’s lack of profitability would appear to make Palantir the higher AI enterprise to put money into. But, Palantir’s success drove up its inventory worth, with shares skyrocketing over 150% prior to now 12 months.

At this level, the agency’s shares look fairly dear when evaluating its price-to-sales (P/S) ratio to C3.ai. The P/S ratio tells you ways a lot buyers should pay per share for a greenback’s price of income.

Information by YCharts. PS Ratio = price-to-sales ratio.

Wall Avenue agrees. The consensus amongst Wall Avenue analysts is a “maintain” ranking with a median share price target of $28 for Palantir inventory. On condition that shares commerce for round $43 on the time of this writing, Wall Avenue’s worth goal signifies a perception that Palantir shares are overpriced.

That stated, C3.ai is much from a purchase. Like Palantir, the consensus amongst Wall Avenue analysts is a “maintain” ranking for C3.ai inventory, with a median share worth goal of $22.

Including to that is uncertainty across the renewal of C3.ai’s partnership with Baker Hughes. Consequently, any choice round shopping for C3.ai shares ought to be delayed till this partnership scenario is resolved.

If not for Palantir’s sky-high valuation, it could be the higher AI funding over C3.ai, given its superior financials and AIP’s success and future potential with Warp Velocity. However at the moment, it is best to attend for a drop in Palantir’s share worth earlier than deciding to purchase.

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