Whether Palantir Technologies can expand its prowess in artificial intelligence into new commercial markets is a big question for bulls and bears. Right now, it's too early to count on PLTR stock as one of the best AI stocks, says one analyst.
"The launch of ChatGPT has generated significant interest in AI software and its applications," CFRA Research analyst Janice Quek said in a note to clients Tuesday.
She added, "As a strong market player, PLTR is well positioned to benefit from investments in the AI software platform market. However, recent performance is concerning as we question its ability to execute and capitalize on the large market opportunity."
On the stock market today, PLTR stock fell 4.4% to close at 7.98.
Palantir is one of many AI stocks to watch. One of them, C3.ai, plunged Tuesday on a short-seller's report. Meanwhile, PLTR stock is up 26% this year. In 2022, shares fell nearly 65%.
Also, Palantir gets nearly 60% of revenue from government agencies. They use Palantir software for intelligence gathering, counterterrorism and military purposes. That gives it a narrower market than some rivals.
AI Stocks: Battlefield Opportunity
Meanwhile, Bank of America maintains a buy rating on PLTR stock.
In a Feb. 28 report, BofA analyst Mariana Mora said: "Palantir is uniquely positioned as a software infrastructure company with robust experience providing AI-powered data operating solutions to intel and defense customers."
Mora added, "According to CEO Alexander Karp, the most applicable opportunity for AI is on the battlefield. One such example is the company's Skykit tactical C2 system, which enables operators to source and aggregate data, allowing for timely and actionable analysis."
Founded in 2003, Palantir's government work preceded recent AI buzz. Startup OpenAI launched ChatGPT in late November.
Also, generative AI technology already is finding applications in a number of areas. They include marketing, advertising, drug development, legal contracts, video gaming, customer support and digital art.
So Palantir aims to grow its commercial business by expanding into the health care, energy, automotive and manufacturing sectors.
PLTR Stock: AI Software Market Growth
CFRA Research cited market research firm IDC's forecast for AI growth. IDC projects that the AI software platform market will grow from $19 billion in 2022 to $47 billion in 2026.
"While we are optimistic of PLTR's AI opportunity, recent performance gives us pause on a buy recommendation," added CFRA's Quek. "Revenue growth has been decelerating rapidly from lumpy results in its government segment and smaller deal sizes."
However, BofA has a different view.
"Despite some controversy around the use of PLTR's software around the right to privacy, the company has historically focused on the responsible use of AI," said Mora.
She added, "The increasing availability of AI-powered solutions in commercial/civilian applications raises concerns of security and transparency. According to Karp, this trend should require AI-systems to incorporate increasing security, privacy, regulatory and accountability requirements. Palantir's solutions are in a unique position as its ontology is designed to embrace these requirements already."
Meanwhile, bulls and bears on PLTR stock have been looking at the renewal of big U.S. government contracts. Also, Palantir's business in Japan is a new factor.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.
