For the last two years, technology stocks have been rocking thanks to an overwhelmingly bullish narrative surrounding artificial intelligence (AI). Among AI’s biggest winners have been software businesses, a theme that I don’t see changing anytime soon.
Below, I’m going to compare two of the biggest names in enterprise software benefiting from the AI revolution: Palantir Technologies (NASDAQ: PLTR) and Salesforce (NYSE: CRM). While each appears well positioned to continue riding the AI wave, I see Palantir as the superior choice for growth investors.
Let’s dig into how each of these software leaders is affecting the AI sector and assess why I think Palantir will become the bigger company by the end of the year.
As of this writing (Feb. 10), Salesforce has a larger market capitalization than Palantir by roughly $52 billion. With that said, the underlying trends shown in the chart below are quite interesting.
Check out the difference between how each company’s valuation has moved since AI emerged as the next megatrend. Over the last couple of years, Palantir’s valuation has expanded significantly. By contrast, Salesforce’s price movement has exhibited far more ebbs and flows. As a result, there’s a clear convergence seen in the graph below with Palantir’s market value starting to encroach on that of Salesforce.
Salesforce owns a number of properties including data analytics platform Tableau and messaging tool Slack. The company’s prior strategy of acquiring competing businesses and integrating them with the core ecosystem helped build an end-to-end software suite that offers businesses a variety of data-driven applications, but investors eventually grew tired of such an approach.
For the last couple of years, Salesforce has been under enormous scrutiny from Wall Street to start delivering more robust revenue acceleration and profit margin expansion excluding inorganic assets purchased through acquisitions.
I’ll admit that Salesforce has made good on this promise … for the most part. The issue Salesforce continues to face revolves around consistency. In other words, sometimes the company blows Wall Street’s expectations out of the water, while at other times investors are left scratching their heads questioning what is going on in execution.
For this reason, I’m not entirely sold that Salesforce is going to dominate its pocket of the AI realm. Specifically, the company’s newest area of interest, called agentic AI, faces fierce competition — namely from Microsoft, a much larger company with a stronger balance sheet.
