Artificial intelligence (AI) emerged as one of the major investment themes in 2023, driving gains in major indexes. This trend has continued into 2024, with Palantir Technologies (NYSE: PLTR) standing out as an intriguing company. Although not yet a member of the S&P 500 index, Palantir's consecutive quarters of profitability on a generally accepted accounting principles (GAAP) basis suggest that inclusion in the index could be on the horizon. With a remarkable 150% increase in stock price over the past year, there are several factors that could propel Palantir further in 2024 and beyond. In this analysis, we will explore how Palantir is disrupting the AI market and why it appears to be well-positioned for long-term dominance. When one thinks of AI, big tech enterprises like Microsoft, Amazon, and Alphabet often come to mind - and for good reason. Microsoft's significant investment in OpenAI, developer of ChatGPT, sparked an AI arms race, prompting Alphabet and Amazon to invest in rival OpenAI competitor Anthropic. Additionally, companies like Salesforce. com continue to pursue AI aggressively, leveraging past acquisitions. Undeniably, big tech companies have a firm grasp on the AI market. However, investors should recognize that as the AI market evolves, other companies are likely to emerge as leaders. While Palantir remains smaller compared to its big tech counterparts, it is widely regarded as one of the premier AI software providers. For years, Palantir marketed its software platforms under Apollo, Gotham, and Foundry. Over nearly two decades, the company has fostered close ties with the U. S. military and Western allies, leading many to perceive it primarily as a government contractor with uncertain prospects in the private sector. However, last year Palantir released Palantir Artificial Intelligence Platform (AIP), which has provided investors with a clearer understanding of its reception. To promote its new AI software, Palantir initiated "boot camps" - immersive seminars that allow potential customers to experience the various products and identify AI use-cases where Palantir can contribute. This innovative lead generation strategy has resonated with customers, resulting in a remarkable 23% increase in Palantir's private sector revenue over the past year, nearly double that of its government business.

Moreover, customer count in the commercial sector has grown by 45% year over year for the trailing 12-month period ending on September 30th. While the boot camps have been encouraging, it is important to recognize that Palantir has yet to fully capitalize on the long-term benefits. The company is poised to leverage its upselling and cross-selling capabilities to improve customer unit economics, ultimately boosting its revenue and profitability. Comparing Palantir's price-to-sales (P/S) multiple with a group of competing enterprise software companies, we find that Palantir's multiple of 18. 2 falls in the middle of the pack, aligned with ServiceNow and MongoDB. Furthermore, this current valuation closely aligns with Palantir's long-term average of 18. 6. Given the substantial growth of Palantir's private sector business since its IPO in 2020, which mitigated concerns about government dependency, along with its robust free cash flow and strengthened balance sheet, the company's valuation is somewhat perplexing. These advancements warrant a more favorable valuation, yet Palantir finds itself trading at historical levels despite considerable progress on multiple fronts. Considering the surge in demand for various applications in generative AI and Palantir's unique position across both the public and private sectors, it is reasonable to see the company quietly emerging as a leader in enterprise tech. While larger tech behemoths capture investor attention, Palantir could present an under-the-radar AI opportunity. As the markets soar to new heights, the long-term prospects of AI-driven secular trends could further fuel gains. Investing in Palantir Technologies with a dollar-cost averaging strategy and building a long-term position may prove to be a lucrative move. Please note that before making any investment decisions, it is advisable to consider several factors, including the insights and guidance provided by Stock Advisor, which is known for its successful blueprint for investor success. The service offers recommendations on portfolio building, regular analyst updates, and two new stock picks monthly. Since 2002, Stock Advisor has generated returns that have exceeded the performance of the S&P 500 by over triple. It is important to disclose that the former CEO of Whole Foods Market, John Mackey, serves on the board of directors for The Motley Fool, as does Suzanne Frey, an executive at Alphabet. Lastly, the author, Adam Spatacco, holds positions in Alphabet, Amazon, Microsoft, and Palantir Technologies, while The Motley Fool holds positions in Alphabet, Amazon, Datadog, Microsoft, MongoDB, Palantir Technologies, Salesforce, ServiceNow, and Snowflake. The Motley Fool maintains a comprehensive disclosure policy.