The stock market's recent volatility pushed down the price of many high-flying artificial intelligence stocks. Concerns over the future of the economy roiled the market. But the situation created an opportunity to invest in some good AI companies for less money.
Two businesses to consider are BigBear.ai (BBAI 4.71%) and Palantir Technologies (PLTR 2.63%). Both deliver AI solutions to the federal government, which plans to invest up to half a trillion dollars in AI infrastructure. President Trump's administration is determined to see the U.S. lead the world in artificial intelligence.
This puts BigBear.ai and Palantir in a position to benefit from the government's AI spending. But not all businesses involved in AI are worthwhile investments for the long haul. Here's a dive into BigBear.ai and Palantir to help you evaluate which AI company to consider for your portfolio.
BigBear.ai's pros and cons
NYSE: BBAI
Key Data Points
BigBear.ai focuses on AI software for national security and defense. For instance, its AI screens travelers at the Denver International Airport to automatically verify their identities.
The company counts the Department of Homeland Security, the U.S. Army, and other federal agencies as customers. This led to BigBear.ai's 2024 revenue increasing to $158.2 million from 2023's $155.2 million.
The firm anticipates its sales growth will continue in 2025. Management forecasted revenue to come in between $160 million to $180 million this year. That projected sales increase is encouraging, but not strong for an AI business, especially looking at the low end of the guidance.
Moreover, BigBear.ai failed to hit its 2024 outlook of at least $165 million, adding doubt about its ability to achieve its 2025 forecast. However, the company has a new CEO this year, Kevin McAleenan, who may be able to ensure BigBear.ai achieves its target.
Another factor to consider is that the company is not profitable. It posted a net loss of $257.1 million in 2024, a big jump up from the previous year's $60.4 million net loss. A substantial portion of this outsized loss was due to changes in the value of the company's derivatives portfolio.
While its common for tech companies to operate at a loss for years, BigBear.ai's failure to hit its sales target last year, coupled with uninspiring 2025 guidance and the uncertainty of a new CEO, means the firm is a risky investment at this point.
A look at Palantir
NASDAQ: PLTR
Key Data Points
Like BigBear.ai, Palantir's government business is growing. In 2024, government sales rose 28% year over year to $1.6 billion. But while BigBear.ai relies predominantly on U.S. government revenue, Palantir produced an additional $1.3 billion from commercial organizations.
The commercial segment of Palantir's business is doing well. Sales grew 29% year over year in 2024, helping the company reach $2.9 billion in total revenue last year.
For 2025, Palantir expects sales to hit around $3.7 billion. That would represent strong 28% growth over 2024's $2.9 billion.
Palantir's sales growth is due to the popularity of its AI platform (AIP), which helps organizations incorporate AI into their operations. AIP can also recommend actions to take, and execute them on behalf of the organization.
Palantir's sales expansion led to a healthy 80% gross margin in 2024. This contributed to the company's net income of $467.9 million in 2024.
Making a choice between BigBear.ai and Palantir
Although both companies provide artificial intelligence to governments, BigBear.ai is not seeing the level of success experienced by Palantir, nor are its financials as strong.
Not only is BigBear.ai unprofitable, at the end of 2024, its balance sheet was frightening. Total assets of $343.8 million were eclipsed by $346.4 million in total liabilities. Since then, new CEO Mr. McAleenan focused the firm on reducing net debt from $150 million in Q4 to $27 million by March.
Even so, compare this to Palantir's balance sheet. At the end of 2024, the company possessed $6.3 billion in total assets, including cash and equivalents of $2.1 billion. Its cash pile alone was nearly double total liabilities of $1.2 billion.
For now, investors should wait for BigBear.ai's Q1 results to review the state of the company's sales growth, balance sheet, and other financials before deciding whether to invest.
Meanwhile, Palantir is firing on all cylinders with strong sales growth, excellent financials, and a successful AI offering. This makes Palantir the superior AI investment for the long run.
