Palantir and the AI Boom: Opportunities for Investors?

The ongoing earnings season is keeping investors on edge, particularly regarding investments in artificial intelligence (AI) within the S&P 500. Analysts forecast that earnings growth will slow: S&P 500 earnings are expected to rise by 5.3% compared to the same quarter last year, after a 13.2% increase in the second quarter, as reported by Reuters. Especially the technology and communication services sectors show promising prospects with expected earnings increases of 15.4% and 12.3% year-over-year, respectively. Since then, AI-related companies have dominated the earnings narrative, significantly contributing to the S&P 500's record high levels, which has already risen by about 21% this year. Howard Chan, CEO of Kurv Investment Management, notes that analysts are critically assessing how large companies are commercially implementing their AI potential. For instance, Meta experienced a stock price rise following forecasts of strong revenue growth—an indication that its AI investments are being financed by digital advertising revenue. In contrast, analysts question Google's substantial AI investments, as their integration into the existing business model remains unclear. With the S&P 500 trading at 22.3 times the estimated future earnings—well above the long-term average of 15.7—many investors hope that this quarter's results justify higher stock valuations. Solita Marcelli of UBS Global Wealth Management remains optimistic and sees potential for further stock gains, particularly as the semiconductor sector focuses on AI investments. While Palantir Technologies impresses with its strong quarterly results and sustainable growth due to its AI-powered data integration platforms, it remains "only" ranked 31st among the hottest AI stocks. Wedbush recently raised the price target to $45 but sees greater opportunities for higher returns in a shorter time with other AI stocks.