The stock market's recent volatility pushed down the price of many high-flying artificial intelligence (AI) stocks. Concerns over the future of the economy are roiling the market. But the situation created an opportunity to invest in some good AI companies at a discount.
Two businesses to consider are BigBear.ai(NYSE: BBAI) and Palantir Technologies(NASDAQ: PLTR). Both deliver AI solutions to the federal government, which plans to invest up to half a trillion dollars in AI infrastructure. President Donald Trump's administration is determined to see the U.S. lead the world in artificial intelligence.
This puts BigBear.ai and Palantir in a position to benefit from the government's AI spending. But not all businesses involved in AI are worthwhile investments for the long haul. Here's a look at BigBear.ai and Palantir Technologies to help you evaluate which AI company to consider for your portfolio.
BigBear.ai's pros and cons
BigBear.ai focuses on AI software for national security and defense. For instance, its AI screens travelers at the Denver International Airport to automatically verify their identities.
The company counts the Department of Homeland Security, the Army, and other federal agencies as customers. This led to BigBear.ai's 2024 revenue increasing to $158.2 million from 2023's $155.2 million.
The firm anticipates its sales growth will continue in 2025. Management forecast revenue to come in between $160 million to $180 million this year. That projected sales increase is encouraging, but not strong for an AI business, especially looking at the low end of guidance.
Moreover, BigBear.ai failed to hit its 2024 outlook of at least $165 million, adding doubt about its ability to achieve its 2025 forecast. However, the company has a new CEO this year, Kevin McAleenan, who may be able to ensure BigBear.ai achieves its target.
Another factor to consider is that the company is not profitable. It posted a net loss of $257.1 million in 2024, a big jump from the previous year's net loss of $60.4 million. A substantial portion of 2024's outsized loss was due to changes in the value of the company's derivatives portfolio.
While it's common for tech companies to operate at a loss for years, BigBear.ai's failure to hit its sales target last year, coupled with uninspiring 2025 guidance and the uncertainty of a new CEO, means the firm is a risky investment at this point.
A look at Palantir
Like BigBear.ai, Palantir's government business is growing. In 2024, government sales rose 28% year over year to $1.6 billion. But while BigBear.ai relies predominantly on U.S. government revenue, Palantir produced an additional $1.3 billion from commercial organizations.
The commercial segment of Palantir's business is doing well. Sales grew 29% year over year in 2024, helping the company reach $2.9 billion in total revenue last year.
For 2025, Palantir expects sales to hit around $3.7 billion. That would represent strong 28% growth over 2024's $2.9 billion.
Palantir's sales growth is due to the popularity of its AI platform (AIP), which helps organizations incorporate AI into their operations. AIP can also recommend actions to take, and execute them on behalf of the organization.
Palantir's sales expansion led to a healthy 80% gross margin in 2024. This contributed to the company's 2024 net income of $467.9 million.
The choice between BigBear.ai and Palantir
Although both companies provide artificial intelligence to governments, BigBear.ai is not seeing the level of sales success experienced by Palantir, nor are its financials as strong.
Not only is BigBear.ai unprofitable, but its balance sheet was frightening at the end of 2024. Total liabilities of $346.4 million eclipsed total assets of $343.8 million. Since then, McAleenan focused the firm on reducing net debt from $150 million in Q4 to $27 million by March.
Even so, compare this to Palantir's balance sheet. At the end of 2024, Palantir possessed $6.3 billion in total assets, including cash and equivalents of $2.1 billion. Its cash pile alone was nearly double total liabilities of $1.2 billion.
For now, it's best to wait for BigBear.ai's Q1 results to review the company's progress on revenue growth, its balance sheet, and other financials before deciding whether to invest.
Meanwhile, Palantir is firing on all cylinders, with strong sales, excellent financials, and a successful AI offering. This makes Palantir the superior AI investment for the long run.
Now, the question is whether buying Palantir shares at this time makes sense. To assess this, let's look at the stock's price-to-earnings (P/E) ratio, which tells you how much investors are willing to pay for a dollar's worth of earnings.
While Palantir's earnings multiple is down from its peak earlier this year, it's still higher than it's been historically at the time of writing. This suggests Palantir stock is still pricey, so it's worth waiting for the share price to drop before deciding to buy.
Should you invest $1,000 in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $721,394!*
Now, it’s worth notingStock Advisor’s total average return is839% — a market-crushing outperformance compared to164%for the S&P 500. Don’t miss out on the latest top 10 list, available when you joinStock Advisor.
Robert Izquierdo has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
