The spending on artificial intelligence (AI) software and tools has been picking up momentum at a solid pace of late, and that's not surprising as this technology is expected to deliver terrific productivity gains. According to McKinsey, AI has the potential to deliver $4.4 trillion worth of productivity gains in the long run.
Palantir Technologies (PLTR +2.45%) and BigBear.ai (BBAI +2.53%) are two companies that can help investors benefit from the massive generative AI software market that's expected to clock a compound annual growth rate (CAGR) of 36% through 2030. But if you have to choose from one of these two AI stocks for your portfolio right now, which one should it be?
Let's find out.
Image source: Getty Images.
The case for Palantir Technologies
Palantir is considered to be the leading player in the AI software platforms market by third-party research firms such as Forrester and IDC. That explains why the company has been landing new customers for its AI software solutions at a terrific clip.
NASDAQ: PLTR
Key Data Points
Its overall customer count was up by 43% year over year in the second quarter of 2025. But more importantly, the productivity gains delivered by Palantir's AI solutions are helping it expand its business with existing customers. As a result, the company's deal size is improving, allowing it to close 157 deals worth at least $1 million last quarter. That was a jump of 64% from the year-ago period, exceeding the growth in its customer base.
It is easy to see why customers spend more money on Palantir's AI software if we take a look at management's comments on the recent earnings conference call. As pointed out by Chief Revenue Officer Ryan Taylor:
The impact our software is delivering for our customers as they cross the chasm is ever widening their advantage over the AI have-nots. Citibank shared that the customer onboarding process and relevant KYC and security checks that once took them nine days now take seconds. Fannie Mae recently announced they're working with Palantir, decreasing the time to uncover mortgage fraud from two months down to seconds.
These are just two of the many examples highlighted by management about how its Artificial Intelligence Platform (AIP) is helping it win more customers and strengthen its relationship with existing ones. As such, it won't be surprising to see Palantir sustain its healthy growth rates following the 45% spike in revenue forecast for 2025.
Another important thing worth noting is that Palantir's ability to gain more business from existing customers drives stronger bottom-line growth. Its earnings are expected to jump 57% this year to $0.64 per share, followed by impressive growth over the next couple of years as well.
Data by YCharts.
So, Palantir is likely to remain a top AI stock for a long time to come, thanks to the secular growth opportunity in the AI software market.
The case for BigBear.ai
Just like Palantir, BigBear.ai also provides AI software solutions that help its customers make faster and better decisions. The stock has more than tripled in value in the past year, as investors buy it in anticipation that it could become a big winner of the lucrative opportunity in the AI software market. However, investors can buy this stock at a much cheaper valuation despite its red-hot rally.
NYSE: BBAI
Key Data Points
BigBear.ai stock trades at 9 times sales as compared to Palantir's way more expensive price-to-sales ratio of 115. Another thing working in BigBear's favor is its fast-growing revenue backlog that could lead to an acceleration in the company's growth. It ended the second quarter with a backlog of $380 million, up by 43% from the year-ago period.
However, a closer look at BigBear.ai will tell us that the company's growth is nowhere near that of Palantir's. Its revenue slid 18% year over year in Q2 to $32.5 million, as it was unable to convert some of its Army contracts into revenue. This brings us to the reason why BigBear.ai has been in hot water of late.
The company relies on government contracts for a majority of its revenue. So, its business is dependent on government budgets and policies, which is why it was forced to lower its 2025 guidance when it released its Q2 results. Investors pressed the panic button, and BigBear.ai stock went into free-fall mode since the earnings' release on Aug. 11.
The company's updated revenue guidance of $132.5 million for 2025 would be lower than the $158 million in revenue it generated last year. Moreover, BigBear.ai's backlog doesn't necessarily guarantee that its growth will pick up due to certain caveats associated with that metric. As such, just because BigBear.ai is cheaper than Palantir doesn't make it a better buy than the latter.
The verdict
Palantir, though extremely expensive right now, has the ability to justify its rich valuation thanks to its solid position in the fast-growing AI software space. The company is quickly building up a solid customer base and is also winning a bigger share of their wallets. That's the reason why its forward sales multiples are significantly lower than the trailing multiple.
Data by YCharts.
So, investors looking to choose from one of these two AI stocks for their portfolio right now would be better off buying Palantir, given the company's fast pace of growth and sunny prospects considering its leading position in the AI software market.
