As we enter 2025, we compare C3 Ai and Palantir in the fast growing market of Ai Software! (CAGR of 35% through 2030)

 Investment Report on C3.ai and Comparison with Palantir

Introduction C3.ai and Palantir are two key players in the burgeoning AI software market, which is witnessing exponential growth due to increased adoption of AI solutions across industries. This report evaluates C3.ai's current business and future prospects, its customers, partnerships, financials, and growth trajectory. Additionally, it includes a comparative analysis of C3.ai and Palantir on valuation, growth metrics, and positioning in the AI market.

Business Overview

• C3.ai: C3.ai offers enterprise AI solutions tailored to sectors such as energy, manufacturing, utilities, financial services, and defense. It provides a comprehensive suite of applications that enable predictive analytics, optimization, and operational efficiency. C3.ai recently transitioned to a consumption-based pricing model, aligning costs with customer usage, which has driven market adoption and improved revenue growth.

• Palantir: Palantir specializes in data integration, big data analytics, and AI-driven insights, primarily serving government agencies and large enterprises. Its flagship platforms, Palantir Gotham and Foundry, are widely recognized for their applications in national security, supply chain optimization, and predictive maintenance.

Financial Performance (2024)

• C3.ai:

  • Fiscal year revenue grew by 16% to $310.6 million.

  • Q4 FY2024 revenue increased by 20% year-over-year, reaching $86.6 million.

  • Strong federal segment growth, with revenue doubling year-over-year.

• Palantir:

  • Achieved profitability with net income of $302 million in 2024.

  • Revenue grew by 24% year-over-year to $2.2 billion.

  • Significant expansion in commercial revenue and sustained growth in government contracts.

Key Customers and Partnerships

• C3.ai Customers:

  • Energy: Shell, ExxonMobil, Baker Hughes.

  • Utilities: Con Edison.

  • Government: U.S. Air Force, U.S. Navy, U.S. Marine Corps, and the Defense Counterintelligence and Security Agency.

• Palantir Customers:

  
  
  

  • Government: U.S. Department of Defense, NHS (UK).

  • Commercial: BP, Airbus, Ferrari.

• Strategic Partnerships:

  • C3.ai has a strategic alliance with Microsoft, leveraging Azure to scale AI applications. This partnership could expand its sales reach significantly.

  • Palantir’s partnerships with IBM and AWS bolster its AI and cloud capabilities, enhancing its data integration offerings.

Market Valuation and Metrics

• C3.ai:

  • Price-to-Sales (P/S) Ratio: 9.4x. 

  • Becoming profitable, focused on scaling and investing in growth.

• Palantir:

  • Price-to-Earnings (P/E) Ratio: 80x, reflecting premium valuation due to profitability and market leadership.

  • Price-to-Sales (P/S) Ratio: 13.2x.

AI Software Market Expansion 2024-2030

The AI software market is projected to grow at a CAGR of 35% through 2030, driven by:

• Increased AI adoption across industries such as healthcare, defense, and finance.

• Rising demand for generative AI and machine learning platforms.

• Growing investments in AI infrastructure and R&D.

Comparison: Growth Prospects

• C3.ai:

  • Positioned to benefit from its diverse customer base and generative AI solutions.

  • Adoption of the consumption-based model aligns with market demand for flexibility.

• Palantir:

  • Well-established in government and defense, expanding into commercial sectors.

  • Focus on AI/ML advancements and leveraging its proprietary platforms for scalable solutions.

Forrester Research predicts Ai Software spending in 2025 of $64 Billion

Conclusion 

While C3.ai is growing its presence in the AI market through innovation and partnerships, it remains unprofitable, which could impact investor sentiment in the short term, however, it's forward earnings valuation under 10% indicates it may be a buying opportunity.

Palantir, with its profitability and established customer base, commands a higher valuation but also faces challenges in maintaining its growth rate and valuation now looks extended.

As the AI software market expands, both companies are poised to capture significant opportunities, though their trajectories differ based on strategic focus and market dynamics.

ED Note:

Currently we have no position in either Palantir and C3Ai, however, they are on our watch list!

update: Jan 6 2024

We purchased some shares in Ai

As AI and quantum computing boom, several companies could be attractive takeover targets for large tech companies due to their advanced technology, niche expertise, or significant intellectual property portfolios.

Here are 10 potential takeover targets:

AI-Focused Companies

1. C3.ai – Focuses on enterprise AI applications. Its generative AI capabilities, combined with a well-established customer base, could be appealing for big tech firms looking to bolster their AI offerings.

2. SambaNova Systems – A leading AI hardware and software platform provider, specializing in advanced AI models and efficient processing. Their AI chips are optimized for AI workloads and could be a valuable asset for companies looking to enhance their AI infrastructure.

3. Hugging Face – Hugging Face is known for its open-source natural language processing (NLP) models. Its leadership in NLP and machine learning models could attract companies looking to expand in these areas.

4. Scale AI – Specializes in AI data labeling and providing data for machine learning models. Scale AI's data annotation platform could be crucial for tech companies aiming to improve their AI training processes.

5. Adept AI – A company building general AI agents that can interact with software tools and automate tasks. Its focus on user-friendly AI solutions could make it attractive for companies aiming to improve AI-driven automation.

Of the above Ai companies mentioned, only C3Ai is publicly traded at this writing 

while 2 through 5 are all currently private companies!

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Quantum Computing-Focused Companies

6. Rigetti Computing – Known for its work in hybrid quantum-classical computing. It has been working on quantum hardware and software integration, making it attractive to tech giants like IBM, Google, or Microsoft aiming to accelerate quantum computing development.

7. IonQ – A leader in trapped-ion quantum computing, offering a unique hardware approach. Their quantum computers are already being deployed in partnerships with major tech firms, which makes them an attractive acquisition target.

8. PsiQuantum – Focused on building fault-tolerant quantum computers using photonic technology. This could be highly appealing to a big tech company aiming for breakthroughs in scalable quantum hardware.

9. D-Wave Systems – Specializes in quantum annealing systems. Although it's been more niche, its longstanding expertise and business use cases could be of interest to tech companies looking for a more commercial quantum solution.

10. Zapata Computing – Specializing in quantum algorithms and software platforms. Its expertise in hybrid quantum solutions and advanced algorithm development could make it attractive for tech companies that want to integrate quantum technology with AI.

Except for PsiQuantum (Which is privately held) these companies are all traded publicly on the Nasdaq Exchange. 

These companies are leaders in their fields and would bring valuable technology, intellectual property, and talent to big tech firms looking to expand in AI and quantum computing.

Editor note:  We own shares in 5 of the companies listed now!

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