It’s no secret that in recent years, investors have become increasingly curious about the prospects of artificial intelligence (AI). That said, I found much of the discussion around AI to be largely redundant.
Software companies are touting how AI-powered services can drive higher levels of productivity in the workplace, while hardware and infrastructure players essentially hold the keys to the AI car thanks to the power data centers and semiconductor chips.
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More recently, however, I have started reading about the role of AI in the military. I already knew it Palantir Technologies(NYSE:PLTR) was a major player at the intersection of AI and the public sector. However, a recent announcement of Metaplatforms(NASDAQ:META) It reminds me of AI defense applications in a new way.
Below, I’ll detail why Meta’s new partnership with Palantir is so important. Additionally, I will evaluate which stock I consider best to buy right now as the military AI movement intensifies.
One of the biggest advancements in the AI revolution so far is the introduction of the Large Language Model (LLM). While there are plenty of LLMs on the market, OpenAI’s ChatGPT is probably the one you’re most familiar with.
Anecdotally, I found working at ChatGPT quite fun. I use the LLM to help me answer questions if I don’t have the patience to scroll through Google, and from time to time I’ve even used it to help me write software code for personal projects.
Unbeknownst to me, LLMs have much more power than improving productivity or answering questions with a single click. According to a recent press release from Meta, the company’s Llama AI model is making its way to the U.S. government and adjacent private sector contractors.
According to the announcement, LLMs “have helped accelerate defense and high-end computing research, identify security vulnerabilities, and improve communication between disparate systems.”
I guess I’ve never really thought about this idea, but the military shares a lot in common with the private sector when it comes to operational issues. That said, the military isn’t just focused on efficiency: security is its primary concern. According to Mordor Intelligence, the total addressable market size for AI analytics and robotic processing services in the defense sector will be worth more than $60 billion over the next five years.
As part of Llama’s deployment in the public sector, Meta announced its partnership with none other than Palantir. Below, I’ll detail some valuation trends and additional talking points on Meta and Palantir, and evaluate which stock looks like the best opportunity at the moment.
Image source: Getty Images.
Meta’s thesis on AI is quite simple. The company owns a number of social media platforms including Facebook, Instagram and WhatsApp. Additionally, Meta also has a fledgling operation focused on virtual reality, gaming, and the metaverse.
On the social media side, Meta is in a lucrative position to leverage AI in ways that help it understand its user base on an even deeper level. In turn, Meta can improve its targeted ad campaigns, which should theoretically drive higher engagement on its platforms. Additionally, offering a unique suite of VR and gaming products opens the door to a whole new cohort of users on the platform, while diversifying the company’s advertising-heavy business model.
I see Meta moving into the defense space and expanding its AI capabilities into the public sector as a big deal and a smart move to diversify its long-term roadmap. Yet despite these attractive tailwinds, Meta’s price-to-earnings (P/E) ratio of 27 is historically low. I think investors may be overlooking several important catalysts, making this a great time to buy Meta stock hand in hand.
Palantir has become one of the biggest profiles in AI over the past year. Following the launch of the Palantir Artificial Intelligence Platform (AIP) in April 2023, the company quickly entered a renaissance marked by accelerated customer acquisition, revenue growth and consistent profitability.
Palantir’s transformation hasn’t gone unnoticed either. Earlier this year, the company announced a partnership with cloud computing specialist Oracleas well as an agreement with Microsoft which combines AIP with Microsoft’s Azure cloud infrastructure across US defense agencies.
All of these developments, while impressive, have had a notable impact on Palantir’s stock price. As of this writing, Palantir shares have gained more than 240% this year, making it the second best-performing stock on the market. S&P500.
With a market cap of around $140 billion and a price-to-sales (P/S) multiple of 53, I have to say Palantir stock has gotten out of control.
If you’ve read my previous articles on Palantir, you’ll know that I’m incredibly optimistic about the future of the company and fully intend to remain a shareholder. But right now, there is simply too much momentum driving Palantir’s stock and its valuation has become disconnected from reality. For these reasons, I would leave Palantir aside for now, but I would encourage investors to be on the lookout for any selloffs that may occur and use them as opportunities to buy the dip.
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Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions in Meta Platforms, Microsoft and Palantir Technologies. The Motley Fool ranks and recommends Meta Platforms, Microsoft, Oracle and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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