Enhanced Artificial Intelligence (AI) Shares: Palantir versus CrowdStrike (Rewritten)

Enhanced Artificial Intelligence (AI) Shares: Palantir versus CrowdStrike (Rewritten)

There hasn't been a more buzzed-about software stock in the market in 2024 than Palantir (PLTR) (-3.02%). The stock has soared approximately 258% this year and has been a top performer. However, the surge has led to high expectations, and investors might be overlooking other software stocks with promising investment prospects, such as CrowdStrike (CRWD) (-7.14%).

Is Palantir the best software stock to invest in between the two? Or is CrowdStrike the more prudent choice?

Palantir and CrowdStrike thrive in booming markets

Although both stocks often carry the "AI" label, they don't compete and are in distinct industries.

Palantir creates AI software tailored for specific use cases, essentially turning data input into actionable insights. This tool aids decision-makers in businesses and government entities by providing them with the most current information. Additionally, Palantir's latest offering, the Artificial Intelligence Platform (AIP), enables businesses to integrate large language models into their operations, a significant step towards integrating AI rather than using it as a separate tool.

Meanwhile, CrowdStrike is a cybersecurity company that offers various solutions through its Falcon platform. Its endpoint protection software safeguards network access points from potential threats. By utilizing AI to differentiate between normal activity and potential threats, CrowdStrike can shut down threats before they cause damage. CrowdStrike boasts 28 modules that expand upon this basic functionality.

Both companies have shown remarkable business growth and are operating in immense markets with vast potential.

CrowdStrike and Palantir deliver comparable financial results

Palantir's latest financial quarter was celebrated by investors, as it led to a 20% stock surge the following trading day. Revenue increased by 30% year-over-year to $726 million, and it forecasted revenue to reach around $769 million (indicating a 27% growth) in the fourth quarter.

CrowdStrike's financial quarter results are reported one month later than Palantir's, so we won't have CrowdStrike's Q3 fiscal year 2025 (ended Oct. 31) results until Nov. 26. However, we can examine how CrowdStrike anticipates performing in Q3 and its past achievements.

In Q2 fiscal year 2025 (ended July 31), CrowdStrike's revenue soared 32% to $964 million, while its annual recurring revenue (ARR) increased 32% to $3.86 billion. Not only is CrowdStrike more substantial from a revenue perspective, but it also grows at an accelerated pace. For Q3, CrowdStrike predicts revenue to be around $982 million, which equates to 25% growth.

This figure is heavily impacted by a computer crash that CrowdStrike inadvertently caused in late July when a botched update resulted in millions of devices crashing. However, CrowdStrike CEO George Kurtz announced at the Fal.Con conference that their pipeline generation has returned to normal, meaning the impact of this crash on the business was minimal. Consequently, I anticipate that CrowdStrike will likely surpass its revenue projections.

In conclusion, both companies exhibit strong growth patterns, expand at comparable rates, and generate roughly the same amount of revenue. Additionally, they operate in vastly expanding industries. Choosing between the two comes down to valuations.

Palantir's stock price surge has inflated its valuation significantly. It now trades for 55 times sales.

This high valuation surpasses what one would pay for CrowdStrike, making it challenging to justify selecting Palantir over CrowdStrike.

Palantir's hefty price tag is nearly unjustifiable alone, especially when there are other stocks offering the same performance at half the price.

While Palantir has numerous advantages, so does CrowdStrike. With CrowdStrike displaying similar growth rates, it's a hard sell for me to choose Palantir over CrowdStrike.

After considering the performance and valuations of both Palantir and CrowdStrike, it's important for investors to consider their individual investment strategies and risk tolerances. If an investor is willing to pay a premium for potential future growth, Palantir's high valuation might be appealing. On the other hand, if an investor is looking for a stock with comparable performance at a more reasonable price, CrowdStrike could be a more prudent choice for investing money in the finance sector.

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