When it comes to the tech industry, history can provide some important lessons. One of the biggest is that while hardware companies are often the early winners, software companies historically capture the most long-term value. That is why, despite the sector being beaten and battered, software-as-a-service (SaaS) stocks could become the ultimate AI winners.
This happened back during the internet and telecom boom, when companies like Ciscoand JDS Uniphase were reaping huge profits during the build-out. However, it was ultimately the software application platforms built on top of that internet infrastructure that became the great compounding businesses of the next two decades. The same happened during the early PC era, when Intel and hardware manufacturers like Dell, IBM, and Compaq ruled. However, over time, hardware became a low-margin, commoditized business, and software, particularly Microsoft‘s, was where the real competitive moat was, helping it capture most of the long-term economic benefits.
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Even looking at the smartphone revolution, while companies like Qualcomm and Arm have done well, they haven’t seen nearly the same benefits as the companies that owned the smartphone operating systems, like Apple and Alphabet, which have grown to be two of the largest companies in the world. Against that backdrop, let’s look at three AI SaaS stocks to buy.
Palantir
The companies that have been able to control the operating systems, whether with PCs or smartphones, have proven to be the biggest economic beneficiaries throughout history. This is why Palantir (NASDAQ: PLTR) has the potential to eventually become one of the world’s largest companies.
Palantir is essentially trying to control the AI workflow and application layer to make AI more useful in the real world for organizations. Its AI platform can gather information from a variety of sources and then organize it into an ontology where it links data to physical objects, concepts, and processes. The result is fewer costly AI hallucinations and as close to an AI operating system as you will get.
The company has been seeing rapid growth, and the opportunity in front of it is enormous, given that AIP can be used for a wide variety of use cases across industries. In light of this, it would not be surprising to see Palantir ultimately be one of the biggest long-term AI winners.
