Which AI Software Stock between Palantir and Salesforce is More Worthy to Invest in for 2025?
Which AI Software Stock between Palantir and Salesforce is More Worthy to Invest in for 2025?
The initial winners in the realm of artificial intelligence (AI) predominantly consist of organizations engaged in developing AI infrastructure, yet software companies are gradually joining the bandwagon. Two prominent AI software companies poised to shine in 2025 are Palantir Technologies (-2.40%) represented by PLTR and Salesforce (-0.80%) symbolized by CRM.
Palantir has essentially cashed in on the benefits of AI, as its AI platform boosted its revenue at an impressive pace. This boost led to a sensational surge in its stock price during 2024. Salesforce, on the other hand, recently unveiled its essential AI solution.
It's an enticing scenario to forecast which stock will lead the pack in 2025.
AI-driven growth engine
When it comes to AI software, Palantir takes the front seat. Its early triumphs with the government (where its analytics platform is employed for critical tasks inclusive of combating terrorism) paved the way for the integration of AI models in its platform. This transformation effectively transformed the company's platform into an AI operating system capable of facilitating data-driven decisions across several use cases in various industries.
Palantir shies away from developing its own AI models, instead focusing on application and workflow layers. Its platform can lend assistance in terms of logic and functionality, thereby enabling the execution of tasks necessary for their completion. This data is rigorously tested within the platform itself to ensure functionality in real-world applications.
Palantir's AI platform spurred impressive growth within the commercial sector. During the previous quarter, U.S. commercial revenue surged by 54% to reach $179 million. Furthermore, the U.S. commercial clientele increased by 77% year over year. Total revenue ascended by 30% to touch $726 million.
This could merely be the dawn of Palantir's success, given that much of its early AI success emerged from proof-of-concept (prototype) projects. The transition of clients from proof-of-concept to real-life applications must be considered a significant growth catalyst.
In contrast, Salesforce rose to prominence as a pioneer in customer relationship management (CRM), where its platform serves as a centralized storage facility for all customer information. Through its acquisitions of Mulesoft, Tableau, and Slack, it has ventured into the domains of automation, analytics, and employee communication.
Salesforce, on the other hand, pursues leadership in 'agentic AI'. This is often regarded as the next phase of AI, where AI agents can execute tasks sans human interference, to aid in decision-making and carry out actions to achieve specific goals.
The company has recently introduced Agentforce, its autonomous AI agents. These agents are created and employed for various applications, serving as an example in the financial industry. Agentforce can execute research on discussion points prior to meetings (for instance, analyzing a company's exposure to international markets), verifying power-of-attorney status for compliance, and directing correspondences to licensed supervisors. In healthcare, Agentforce can review benefit coverage and approve treatment requests.
Agentforce was launched in October, but the company announced on its early December earnings call that it had already sealed 200 Agentforce deals and boasted thousands of potential deals in its pipeline. Agentforce is a subscription product, commanding a fee of $2 per conversation, with the company envisioning the deployment of 1 million Agentforce AI agents by the end of fiscal 2026 (ending January 2026). This signifies a mammoth opportunity for the company over the subsequent years.
Valuations and conclusion
Palantir ranks as the more rapidly growing of the two companies, with revenue growth of 30% during the recent quarter compared to Salesforce's 8%. Salesforce has projected similar 7% to 9% revenue growth for the fourth quarter, while Palantir has forecasted 27% revenue growth. If their AI solutions prosper, both companies hold promising growth potential beyond these forecasts.
From a valuation perspective, Salesforce appears to be the economical pick. It trades at a forward price-to-sales (P/S) multiple of under 8 times the next year's estimates, while Palantir values nearly a 51 times multiple. This represents an extraordinary valuation for a company currently expanding its revenue by 30%, and surpasses historic peak software-as-a-service (SaaS) multiples.
Although Palantir possesses a substantial opportunity ahead, future growth is largely priced in, and there's minimal room for error. Given these considerations, I strongly advocate the safer and more economical Salesforce, which seems poised to seize its own sizable opportunity with Agentforce.
Investing in the stocks of these AI software companies is an intriguing prospect for 2025. Palantir's impressive revenue growth, driven by its AI platform, has attracted attention and increased its stock price.
Salesforce's recent introduction of Agentforce, autonomous AI agents for various applications, has already secured 200 deals and has thousands more in its pipeline, making it a promising growth opportunity in the future.