Chip stocks and hyperscalers have grabbed most of the headlines when it comes to the artificial intelligence (AI) megatrend, as companies and governments around the world race to build out their data center infrastructure to support AI. However, those companies are not the only ways for investors to play the trend. In fact, the software orchestration space could become a better long-term way to play AI, given its recurring-revenue nature.
Among the companies looking to be major providers of the software backbone for AI are Palantir Technologies (PLTR +2.07%) and UiPath (PATH +3.32%).
Palantir
NASDAQ: PLTR
Key Data Points
Palantir Technologies is at the forefront of the AI orchestration trend through its Artificial Intelligence Platform (AIP). Instead of building its own large language model (LLM), it's focusing on helping those models perform better in the real world.
AIP does this by gathering data from a wide variety of sources, organizing it into ontologies, and linking them to real-world assets and processes. This gives LLMs the clean data they need to provide better insights and reduce AI hallucinations, which occur when AI models produce incorrect conclusions. This is exactly the sort of system that organizations will need to apply AI to solving their real-world problems.
Palantir started as a federal government vendor, and the U.S. government remains its largest customer. The public sector segment is still a fast-growing business for the company, and it continues to win a boatload of contracts. However, its strongest-performing area of late has been the U.S. commercial segment, where clients are using AIP to help solve a wide range of problems. These uses include everything from helping monitor for sepsis at hospitals to underwriting insurance to helping pipeline companies manage their maintenance schedules.
Revenue growth has accelerated each of the past nine quarters, and last quarter, it surged 63% to $1.18 billion. It's both adding new customers and seeing existing customers expand their spending with it aggressively. In Q3, its net dollar retention rate -- which measures changes in revenue from customers who have been with the company for a year or more -- was 134%.
Trading at a forward price-to-sales (P/S) ratio of about 64.5 based on the 2026 analyst consensus, the stock is not cheap. However, Palantir has the opportunity to become one of the biggest AI winners.
Image source: Getty Images.
UiPath
NYSE: PATH
Key Data Points
For investors who are looking for a bargain way to invest in the future of AI orchestration, UiPath could be just the ticket. The stock trades at a P/S ratio of under 4.5, although it only grew its revenue by 14% in Q2 and its annual recurring revenue (ARR) by 11%. Notably, though, Palantir grew revenue by only 13% in Q2 2023 before its growth accelerated.
UiPath is in the midst of transforming from a robotic process automation (RPA) company that uses software bots to perform repetitive, rule-based tasks into an AI agent orchestration platform. With its Maestro solution, it can help coordinate both software bots and AI agents, which can be created using low-code or no-code tools within its platform or come from third parties. Given that bots are much cheaper to run than AI, they are still often the most cost-effective solution for many tasks, and Maestro can help allocate resources to the best solution for a particular job. For example, it could assign a bot for a simple data entry job, but task an AI agent with analyzing a complex contract.
The company recently announced collaborations with several leading AI companies, including OpenAI, Alphabet, and Nvidia. Its most promising one, though, is with Snowflake. The data warehousing behemoth will allow customers to use Maestro to get instant insights from their stored data. This collaboration puts UiPath in a more competitive position versus Palantir.
If UiPath starts to see its revenue growth accelerate, the stock could have huge upside in the coming years.
