It’s the story of the Oakland A’s General Manager Billy Bean’s amazing attempt to scrap together a baseball team using “Sabermetrics” – a system for valuing players – to rebuild a team that is losing big name talent because it can’t afford their high valuations.
Sound familiar? It should.
Names like NVIDIA, Super Micro Computer Inc. and other AI hardware companies are now seeing their valuations called into question, resulting in investors selling these and other stocks.
They’ve put in a hell of a show, but the reality is that the industry is going to continue to continue evolving, creating opportunity in an emerging area of the AI trade.
As a result, investors are going to start looking for “value” players to start replacing the expensive AI stocks.
Let me be clear, NVIDIA and these other “expensive” players will keep hitting the ball. I’m just saying that there are some bigger value players in the industry that are going to start playing in “The Big Show” soon.
You want to get them now before the market realizes their value.
Companies that harness the power of AI and put it to use in various industries are gearing up for a historic expansion as they offer innovative ways for companies to use AI to improve their operations.
To bring it back to my Money Ball reference, you’ve got the opportunity to put together a value-based AI Team that will replace the overvalued players like NVIDIA (NVDA), AMD (AMD), and Super Micro Computer (SMCI).
The healthcare industry stands to benefit incredibly from the application of AI. The industry is one of the largest when it comes to available data that has to do with its operations.
Clinical data, imaging data, genomic data, data from sensors, pharmacological data, operational data… you get the idea.
AI can enhance diagnostic accuracy by analyzing medical imaging and patient data more efficiently than traditional methods, reducing diagnostic errors and improving patient outcomes.
AI-driven tools can personalize treatment plans based on individual patient data, leading to more effective and tailored therapies.
In administrative applications, AI can streamline operations, from managing patient records to scheduling appointments, thus reducing overhead costs and improving service delivery.
AI can also assist in early disease prediction and management, leveraging vast datasets to identify patterns that may be overlooked by human clinicians.
These innovations promise to increase efficiency, reduce costs, and improve both patient care and outcomes in healthcare.
NVIDIA can’t do that. Sure they make the chips that allow it to be done, but those chips need to be used by a company to help the hospitals and other healthcare industry companies.
That’s where a company like Palantir Steps in.
Palantir Technologies (PLTR) was founded in 2004 by Peter Thiel and others. The company started as a venture arm of the CIA, specializing in big data analytics.
Known for its secretive nature and work with government and military, including the NSA and FBI, Palantir also serves private and public sectors in industries like healthcare and finance.
The company’s primary platforms, Gotham and Foundry, facilitate data integration, analysis, and security. Sounds perfect for the healthcare industry, right?
Despite controversies over privacy and ethics, Palantir is pivotal in operations from counterterrorism to managing public health data, like with NHS England's COVID-19 response.
The company just announced an extension of their agreement with Microsoft that will use the secure capabilities of Microsoft’s Azure cloud computing to start working even deeper in the government and healthcare industries.
This partnership will initially allow U.S. defense and intelligence organizations to build AI tools with Palantir to develop action plans and logistics.
This news dropped Thursday, sending Palantir shares 10% higher.
Those gains were added to the 20% gains from earlier in the week after Palantir’s earnings report bested Wall Street expectations.
Palantir’s management also followed-up those positive earnings with an increase in the company’s forward-looking guidance.
The company’s return to impressive revenue growth as it begins to execute on their strength of harnessing AI to provide services for their clients indicates the real value of Palantir.
Shares of the stock are now pressing against the $30 price as a renewed long-term bull market trend is providing a strong tailwind for the stock.
Another display of the value of the company comes from the Wall Street analyst community.
Unlike NVIDIA, Microsoft, Alphabet and other well-known AI stocks, analysts’ expectations for Palantir shares is downright pessimistic.
Current analyst Wall Street analyst recommendations for Palantir show that only 33% of those analysts tracking the stock recommend it as a “buy”. The remaining analysts consider the stock a “hold” or “sell”.
That’s going to change over the next month as Palantir continues to flex their AI service muscle. Analysts will begin upgrading the stock to a “buy”, which will drive prices higher.
On the same note, Wall Street’s current target price for Palantir sits at $24.82, 17% below today’s price.
Target price upgrades will also be a part of the analyst’s guidance on Palantir over the next month or so, another catalyst that will get more investors buying the stock.
I am a holder of the shares with a target price of $40.
My target price on PLTR will be reassessed after the company’s next earnings report on November 5, Election Day.
Long-term investors like me may want to consider a LEAPs call option on Palantir.
This strategy allows an investor to leverage a long-term bullish trend in a stock using options.
In this case, I consider the January 16, 2026, PLTR $35 call an attractive position. This option is currently priced at $7 per contract.
A rally to my target price of $40 before the end of 2024 would result in a theoretical price of $12.25, a 75% gain on the option and that option would still have more than a year of time premium remaining.
I’ll be back next week with another AI Service Value Stock to add to your team.
