Both technology companies are attracting customers eager for AI solutions.
Artificial intelligence (AI) is poised to potentially revolutionize various industries, with some comparing its impact to that of the internet. Numerous companies are attempting to capitalize on AI’s ongoing growth, including Palantir Technologies (PLTR) and C3.ai (AI). Palantir focuses on using AI to extract insights from data, while C3.ai offers organizations ready-to-use and customized AI software.
The AI market is anticipated to grow rapidly, from a projected $184 billion this year to $827 billion by 2030. This raises the question: is Palantir or C3.ai a better investment for the long term? Examining both companies can provide insight.
Palantir’s Position
Palantir has been supporting the U.S. government with data analysis since 2003 and launched its artificial intelligence platform (AIP) in 2023. This new platform has contributed to the growth of Palantir’s commercial sector. In the second quarter, the company saw a 33% increase in sales from the previous year, reaching $307 million in its commercial division, and its total revenue for the quarter was $678 million, a 27% increase from the previous year.
Palantir’s financial health is strong. It reported a net income of $135.6 million for Q2, up from $27.9 million in 2023, and had an adjusted free cash flow of $149 million, an increase from $96 million in the previous year. AIP has been successful in attracting commercial clients, as it enables rapid transition from AI concept to real-world application, a significant advantage according to Palantir’s CTO, Shyam Sankar.
Following AIP’s success, Palantir introduced Warp Speed, a product designed to alleviate manufacturing industry bottlenecks by utilizing AI to enhance supply chains and manufacturing processes. If Palantir can effectively penetrate this large market, valued at nearly $3 trillion in U.S. GDP last year, it could significantly boost its prospects.
C3.ai’s Overview
C3.ai, which began as an energy management company in 2009, shifted to AI software by 2019. Its background in the energy sector facilitated a partnership with Baker Hughes to deliver AI solutions to the oil and gas industry, securing clients like Shell and ExxonMobil.
C3.ai’s software platform addresses various business needs for AI application, including fraud detection in banking. In its fiscal first quarter ending July 31, 2025, the company derived 84% of its revenue from subscriptions, with the remaining percentage from services like training and support. The demand for AI led to rapid revenue growth, with fiscal Q1 sales reaching $87.2 million, a year-over-year increase of 21%.
Despite a fiscal first quarter free cash flow of $7.1 million, a significant improvement from a negative $8.9 million the previous year, C3.ai is not currently profitable, with a Q1 net loss of $62.8 million. Additionally, C3.ai’s partnership with Baker Hughes is set to expire in April 2025, a crucial relationship for the company, potentially representing over a third of its revenue.
Investment Decision: C3.ai vs. Palantir
Deciding between Palantir and C3.ai as a better investment is not straightforward. Both companies show robust revenue growth, but C3.ai’s lack of profitability makes Palantir appear to be a more promising AI business for investment. However, Palantir’s success has caused its stock price to surge over 150% in the past year, making its shares appear expensive when considering its price-to-sales ratio compared to C3.ai.
Wall Street analysts have given Palantir a "hold" rating with a median share price target of $28. With shares trading around $43, analysts believe Palantir’s stock is overpriced. Similarly, analysts rate C3.ai at "hold" with a median share price target of $22. The uncertainty surrounding the renewal of C3.ai’s partnership with Baker Hughes adds to the complexity, suggesting that investments in C3.ai shares should be made only after this situation is clarified.
While Palantir would be the preferred AI investment over C3.ai due to its stronger financials and AIP’s promise, the current valuation warrants waiting for a decline in Palantir’s share price before making a purchase decision.