Artificial intelligence (AI) investing has started to become a bit concerning for some investors. Some believe that the market is in an AI bubble and that it could burst any day and send some of the largest stocks tumbling. While this is a possibility, I think investors need to take a more refined view.
I see both the absence and the emergence of a bubble in the AI sector at the same time. How can that be? It all depends on which companies you look at.
Some stocks, like hardware providers, are actually trading at fairly cheap valuations compared to other big tech stocks. On the flip side, certain AI application companies have extreme valuations, such as OpenAI. However, OpenAI isn’t public yet, so you can’t bet for or against it.
However, there’s one AI stock trading on public markets that is becoming common to bet against: Palantir (NASDAQ: PLTR). Palantir is an AI software company, and analysts have issued many warnings about the stock. So, should you bet against it?
## Palantir’s business is excelling
Palantir makes artificial intelligence-powered data analytics software. The primary idea is to take information from multiple data streams and give its users real-time insights to help them determine what to do next. The company also has features to automate the decision-making process with generative AI tools. Palantir’s software originally catered to government businesses, but it found adoption in the commercial sector as well.
Both government and commercial clients have rapidly adopted Palantir’s technology. This rapid growth has led to significant revenue increases. In fact, Palantir’s revenue has grown by over 100% in the last two years. This kind of growth is rare in the tech industry, and it’s a testament to the company’s innovative products and services.
## Palantir’s valuation is a concern
While Palantir’s growth rate is impressive, the company’s valuation is a concern. Palantir’s stock trades at a premium valuation, which means that investors are paying a higher price for the stock than its actual value. This could be a sign that the stock is overvalued and due for a correction.
However, it’s worth noting that Palantir’s valuation is not uncommon in the tech industry. Many tech stocks trade at high valuations, especially those with high growth rates. So, while Palantir’s valuation is a concern, it’s not necessarily a reason to bet against the stock.
## The verdict
In conclusion, while Palantir’s valuation is a concern, it’s not necessarily a reason to bet against the stock. The company’s growth rate is impressive, and its products and services are in high demand. If you’re considering investing in Palantir, it’s essential to do your research and weigh the pros and cons. With the right approach, Palantir could be a great addition to your investment portfolio.
