UiPath and Palantir are poised to revolutionize industries with their AI capabilities, according to Cathie Wood and her team at Ark Invest.
Artificial intelligence (AI) has the potential to transform industries across the board, and finding companies that can facilitate AI applications in various sectors is a lucrative investment opportunity. Ark Invest, led by Cathie Wood, has identified two such companies that they believe are at the forefront of AI innovation. UiPath, specializing in robotic process automation, and Palantir, focused on generating unique insights through AI, have caught the attention of Ark Invest and are poised to disrupt their respective industries.
UiPath: Automating tasks like a human
UiPath is a leader in robotic process automation (RPA), which enables businesses to identify and automate repetitive tasks, such as data entry or client onboarding. Ark Invest holds shares of UiPath in all six of its active ETFs, indicating their confidence in the company’s potential.
UiPath leverages AI and machine learning to automate tasks, aiming to emulate human behavior. The company also utilizes AI to identify processes within a business that can be automated. However, UiPath faces competition from companies like Microsoft and Salesforce, which have incorporated generative AI capabilities into their RPA services. In response, UiPath released its Autopilot service, which management believes will be valuable to automation developers and everyday users.
UiPath has experienced strong growth, with its annual recurring revenue (ARR) increasing by 24% year over year in the last quarter. However, the growth rate has slowed down compared to the previous year. Despite this, UiPath has significant operating leverage potential as it scales its business. The company’s operating margin improved by over eight percentage points in the last quarter. If UiPath successfully integrates generative AI capabilities, expands its use cases, and fends off competitors, it could see substantial profits in the coming years. With a reasonable enterprise value-to-sales multiple of 9.4, UiPath’s stock has room for further growth.
Palantir: Using AI to generate unique insights
Palantir specializes in processing and analyzing data using AI to provide valuable insights for organizations. Ark Invest holds shares of Palantir in three of its ETFs: Ark Innovation, Ark Next Generation Internet, and Ark Fintech Innovation.
Palantir serves both government and commercial clients, but it is shifting its focus towards commercial customers to ensure more stable revenue streams. To cater to cost-conscious enterprises with specific needs, Palantir has adopted a modular approach, offering a portion of its platform’s capabilities. This new strategy has proven successful, resulting in strong net revenue retention above 100%.
While Palantir’s net revenue retention rate has declined in recent years, the company has attracted more clients to compensate for the decrease. Last quarter, customer count grew by 34%, including a 37% increase in the United States. As a result, Palantir’s revenue growth has reaccelerated to 17% in the most recent quarter. However, the company trades at a higher EV-to-sales multiple of 16, making it a riskier investment compared to other AI stocks. Despite its potential to improve operations for businesses across various sectors, investors may want to approach Palantir with caution due to its valuation.
Conclusion:
Cathie Wood and her team at Ark Invest have identified UiPath and Palantir as two AI stocks with significant potential to disrupt industries. UiPath’s expertise in robotic process automation and Palantir’s ability to generate unique insights through AI make them attractive investment opportunities. While UiPath shows strong growth potential and a reasonable valuation, Palantir’s higher valuation may pose more risk. Investors should carefully evaluate these stocks based on their individual risk tolerance and long-term investment goals. As AI continues to transform industries, companies like UiPath and Palantir are well-positioned to lead the way.
