It's hard to find companies focused on artificial intelligence (AI) not trading for an absurd premium. The market has gone all-in on this trend and spiked the valuations of many companies with mediocre AI offerings.

However, it has left two of its strongest candidates for top AI companies behind, and I think investors must look into these two. Read on to find out why these two companies are undervalued and how they utilize AI to propel their businesses.

1. CrowdStrike

Increased cybersecurity is a massive trend in business, as attacks are ramping up daily. While multiple products are required to patch together a suitable cybersecurity strategy, CrowdStrike (CRWD -1.13%) provides many essentials, starting with endpoint security.

This segment protects network access points like laptops or phones and utilizes AI by constantly evolving its software with trillions of data points to stay up-to-date with the most recent attack methods. This is the focal point of CrowdStrike's offering, but it also has more than 20 other products, including identity protection, cloud security, and threat intelligence, available to its clients.

With 62% of customers utilizing at least five products or more, it's safe to say they find value in CrowdStrike's additional offerings.

This has translated into tremendous business success for CrowdStrike, as it posted annual recurring revenue of $2.56 billion in the fourth quarter of fiscal year 2023 (ended Jan. 31), a growth rate of 48%. From that revenue, it converted $209 million into free cash flow (FCF), a margin of 33%. At a 51.6 times FCF valuation, the stock is far from cheap. But that doesn't include future growth.

With Wall Street analysts projecting CrowdStrike to grow at a 34% pace in 2024, it trades at 36 times forward FCF if you utilize its 33% FCF margin.

That's more palatable and cheaper than Microsoft's forward FCF ratio of 40.

With massive upside ahead for CrowdStrike and the stock trading at a reasonable forward valuation, it looks like an outstanding buy now.

2. Palantir

Palantir's (PLTR -0.62%) product is focused on crunching mounds of data and providing real-time feedback to its clients so that they can make decisions based on the most accurate information available. Palantir started by providing this software to various government agencies, and it was reportedly used to pinpoint Osama bin Laden's final hideout.

While government contracts are still the majority of Palantir's revenue stream, it has also expanded to the commercial side, immensely increasing its total addressable market.

Palantir is an AI-first platform and has recently seen massive interest in its latest product: Artificial Intelligence Platform (AIP). AIP is a large language model (LLM) technology, the same type ChatGPT uses to provide users with information.

Management stated the demand for AIP is unprecedented, and they have reorganized some of the company's staff to account for this demand. They've even gone so far as to implement AIP into a major insurance company's product to automate claims within a few days.

Nvidia's guidance also confirmed this increase in LLM demand, as it stated that it is the primary catalyst for its expected Q2 revenue rise.

This is a massive opportunity for Palantir, and it already looks like it will capitalize on it.

With Palantir increasing its earnings guidance from profitable at the year's end to being profitable every quarter, it's an excellent sign for the business. Even though revenue isn't growing at as fast of a pace as CrowdStrike's (Palantir's revenue grew 18% year over year), it still is growing quickly enough to warrant its valuation 64 times forward earnings valuation -- a number that will substantially decrease as Palantir continues to post profitable quarters.

Palantir has stumbled onto a product gold mine and is doing everything possible to win this race before others arrive. That makes Palantir a strong AI investment, and investors should consider adding shares to their portfolios.