In recent years, the technology sector has become the backbone of the U.S. stock market, contributing to an impressive 40% of its gains since 2010. Among the standout performers are renowned companies like Advanced Micro Devices (AMD), where a $1,000 investment ten years ago would now exceed $23,000 in value. Other tech giants such as Microsoft, Amazon, and Netflix have similarly demonstrated extraordinary growth, with Nvidia navigating remarkable advances powered by artificial intelligence (AI).
AI is on a trajectory of sustained growth, with projections suggesting it could generate a staggering $1.3 trillion in revenue by 2032, compared to just $137 billion this year. Those looking to build a portfolio capable of yielding million-dollar returns would be wise to focus on AI-driven companies for long-term investments.
Let’s dive deeper into two particularly promising players in the AI arena that show potential to significantly enhance investment portfolios:
1. Palantir Technologies (NYSE: PLTR)
While Nvidia garners attention for its powerful semiconductors that fuel AI advancements, Palantir Technologies is crucial for deploying these models in practical environments. Their Artificial Intelligence Platform (AIP) empowers users to develop generative AI applications, seamlessly integrate large language models into their operations, and utilize pre-built AI solutions.
Palantir’s “boot camps” are instrumental in teaching clients the deployment of generative AI tailored to their business needs, which has resulted in substantial contracts. The adoption of AIP has significantly bolstered their commercial client base, showcasing a remarkable 55% year-over-year growth in this segment alone.
In the latest quarter, Palantir reported a total contract value of $946 million—an impressive 47% increase compared to the same period last year. Their net retention rate soared to 114%, reflecting rising expenditures from existing customers. Furthermore, the total remaining deal value surged by 26% to $4.3 billion, indicating robust revenue growth on the horizon.
With analysts projecting a staggering 57% annual earnings growth over the next five years, Palantir stands out as a compelling choice for those seeking to capitalize on the booming AI market.
2. Oracle Corporation (NYSE: ORCL)
Oracle’s software solutions serve as the backbone for many companies leveraging AI technologies. Their partnership with Palantir, which utilizes Oracle’s distributed cloud for its AIP, is just one example of how integral their infrastructure is to modern tech needs.
The demand for Oracle’s cloud services continues to skyrocket, leading to an annualized revenue run rate of $8.6 billion—a remarkable 56% increase in consumption. Over the past year, Oracle’s revenue approached $54 billion, bolstered by this strong demand for AI-enhanced cloud infrastructure.
The company’s remaining performance obligations (RPO), which detail future contract values, rose 53% year-over-year to $99 billion, further indicating anticipated growth. Given the market’s trajectory, Goldman Sachs anticipates the AI infrastructure sector to reach $580 billion by 2030, presenting Oracle with extensive opportunities to expand.
Currently, Oracle’s stock trades at a forward earnings multiple of 28, significantly lower than the tech sector’s average of 46, providing an attractive entry point for investors looking to build a profitable AI-focused portfolio.
Both Palantir and Oracle are positioned to capitalize on the AI revolution, making them excellent candidates for anyone aiming to construct a long-term investment strategy. With the potential of AI still in its infancy, investors would do well to consider incorporating these stocks into their portfolios.
For those contemplating an investment in Palantir Technologies, it’s crucial to weigh the benefits against your overall investment strategy. While the Motley Fool’s Stock Advisor service has recommended various stocks, it’s essential to explore all options to align with your financial goals.
Emphasizing research, consistent updates from qualified analysts, and clear guidance on portfolio management, Stock Advisor offers a comprehensive roadmap for investors eager to maximize their portfolio’s performance. As always, due diligence is key; investigating all available information will enable informed decision-making in today’s rapidly evolving market landscape.