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The company's fourth-quarter earnings show rising demand. AIP demand drove Palantir's U.S. commercial revenue up 70% year over year and 12% sequentially. Management expects segment growth of at least 40% in 2024, albeit that may be cautious.
Palantir's valuation appears inflated, but it's further complicated. The stock trades at 70 times forward earnings and 16 times forward sales, which may scare off investors. The forward price/earnings-to-growth (PEG) ratio, which accounts for growth potential, is less than 1, indicating an undervalued stock.
Microsoft Microsoft (NASDAQ: MSFT) is another generative AI leader. Management anticipated these game-changing algorithms and planned accordingly.
The business invested $13 billion in Chat-GPT maker OpenAI. Microsoft developed AI-powered assistants called Copilots to boost user productivity by collaborating with the startup. Microsoft created Copilots for specific use situations. Copilot for Microsoft 365, its flagship edition, is for office productivity tool users.
Software developers can use GitHub Copilot to write and debug code. Sales, service, and financial workers have versions, and others are under development. Early signs suggest Microsoft has a hit. Copilot users reported 70% increased productivity and 68% higher work quality. The most crucial finding was that 77% "didn't want to give it up."
Microsoft hasn't released a complete quarter of Copilot data, and several versions are being rolled out, making it difficult to quantify the direct impact. Analysts are quite optimistic about Copilot, but Wall Street's projections differ greatly.
Piper Sandler analysts estimate $10 billion in revenue from the technology by 2026. Evercore analysts are more optimistic, believing Copilot could add $100 billion in sales by 2027. Microsoft trades at 36 times projected sales, a premium over the S&P 500's 28. Given the company's growth and early AI revolution start, a premium is justified.
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