AI stocks gained sharply on Friday. BigBear.ai rallied 18%; SoundHound AI skyrocketed 12%; C3.ai jumped 8%.
Trump announced that he intends to appoint venture capitalist David Sacks as his administration's AI and crypto czar. The move signals that the incoming administration will likely make AI a key priority.
BigBear.ai Stock Gets a Boost from Palantir's New Partnership
BigBear.ai stock appears to be getting a boost from news of Palantir's latest partnership. Some investors are betting that BigBear.ai stock could be the next Palantir.
Palantir and Booz Allen Hamilton published a joint press release today announcing that they were teaming up to promote U.S. defense mission innovation. Palantir stock is up 6% on the news.
BigBear.ai and Palantir had previously announced a partnership to advance machine learning technologies and integrate some of the two company's respective capabilities to "extend the operating system for the modern enterprise with data and AI that provide advice and other actionable insights for complex business decisions." While it's possible that contract wins for Palantir will wind up having significant carryover benefits for BigBear, that won't be true in every case.
AI Stocks Surge on Trump AI Czar Announcement and ChatGPT News
Artificial intelligence stocks saw widespread bullish momentum today in conjunction with developments in the space. For starters, President-elect Donald Trump announced that he intends to appoint venture capitalist David Sacks as his administration's AI and crypto czar. The move signals that the incoming administration will likely make AI a key priority.
OpenAI also announced the launch of its o1 reasoning model and a $200 monthly subscription for its new ChatGPT Pro service. SoundHound AI's in-car audio software platform features ChatGPT integration, and it's likely that new feature support from the AI leader will eventually will make it to the audio software specialist's auto offerings. More broadly, OpenAI's move to price its new ChatGPT software at $200 per month has investors feeling bullish about monetization opportunities in the AI space.
Palantir's Partnerships are Good News for C3.ai
While Palantir competes with C3.ai in some spaces, evidence of ramping demand in the defense industry is a broadly bullish sign. C3.ai has also won substantial deals and partnerships with the U.S. government and related defense contractors, and its recent partnership with Microsoft to expand the adoption of enterprise AI points to unfolding opportunities in the private sector as well.
Risks to Concern
Artificial intelligence has been the hot story in 2024, investors may want to pump the brakes a bit.
SoundHound AI’s returns have outperformed all other big name AI stocks across the stretch, and gains have pushed the company's market capitalization to roughly $5.4 billion. Its also gotten more expensive.
SoundHound AI stock is now valued at roughly 64 times this year's expected sales. While the company has been increasing its revenue at a rapid pace and still has big growth opportunities ahead, investors should understand that the company's highly growth-dependent valuation sets the stage for downside risk if growth misses expectations or macroeconomic and political conditions evolve in less favorable directions.
BigBear.ai's share price appears to be making big moves on meme stock momentum, as well as expectations that the stock could be "the next Palantir." While it's possible that BigBear will serve up some big business wins that help push its valuation above current levels, recent gains for the stock appear to be disconnected from fundamental business performance and outlook conditions.
On the other hand, investors should probably move forward with the understanding that with the company's share price climbing thanks to meme stock momentum and excitement surrounding the broader AI software category, SoundHound AI, BigBear.ai, C3.ai look riskier on the heels of their recent rally.
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