Although the stock market’s attention has been on giant artificial intelligence (AI) equities such as Nvidia (NASDAQ: NVDA), there exist other smaller players with potential for growth in the coming year.
Although these smaller entities have also rallied from the AI boom, they can be considered undervalued. Therefore, they have the potential to attract investor interest and buying pressure.
In this regard, Finbold has identified the following two AI stocks whose market capitalization will likely skyrocket to $250 billion by 2025.
Palantir (NASDAQ: PLTR)
Palantir (NYSE: PLTR) has recently witnessed notable growth following its venture into the AI scene. The software company boasts a market cap of $79.70 billion, making it the world’s 224th most valuable firm. To reach a valuation of $250 billion, PLTR needs to grow by a whopping 216%.
Although this target might sound ambitious, if Palantir maintains its recent momentum, it could hit the mark, considering the stock has more than doubled its market cap from $37 billion at the end of 2023.
This growth also depends on the sustainability of the AI momentum and the broader economic outlook. Notably, internal fundamentals support the potential for increased buying interest.
For instance, Palantir serves both government and commercial organizations, an element likely to fuel a surge in revenue. This aspect was evident in Q2 2024 results, where U.S. government revenue grew 24% year-over-year to $278 million, while its commercial revenue surged 33% to $307 million.
The prospects for further growth were highlighted in May when Palantir secured a $480 million deal from the U.S. Army for its Maven Smart System prototype, which scans enemy systems. Such confidence in the firm is likely to translate into increased investor interest.
Additionally, Palantir is set to benefit from recent strategic partnerships, including with Microsoft (NASDAQ: MSFT), to drive AI solutions and digital transformation for customers.
The company’s potential for further growth was also bolstered by its inclusion in the S&P 500 index, which serves as a barometer for the U.S. stock market. The index offers an opportunity for more institutional capital inflow.
Meanwhile, Bank of America (NYSE: BAC) analyst Mariana Perez raised Palantir’s target price to $50, noting that its inclusion in the S&P 500 is a “watershed moment” that could attract institutional investors.
As of the close of markets on September 13, Palantir was trading at $35, gaining 114% in 2024.
Arm Holdings (NASDAQ: ARM)
Since going public in late 2023, the UK-based semiconductor designer has experienced robust growth. As of September 14, Arm Holdings’ (NASDAQ: ARM) market cap stood at $154.44 billion, indicating the stock needs to grow 62% to reach the $250 billion milestone.
If the current AI boom is sustainable, Arm Holdings is well-positioned for growth, especially given its plans to develop its chips by 2025. Under the initiative, contract manufacturers will handle mass production, and if these AI chips outperform existing ones, particularly Nvidia’s, Arm could see a significant surge in revenue and demand.
The stock has also gained support from analysts, with banking giant Morgan Stanley (NYSE: MS) terming it “Our New Top Pick,” citing its involvement in AI. The experts view Arm as a critical player in the ongoing AI revolution.
The company is also recording notable partnerships with other tech giants, such as Apple (NASDAQ: AAPL). Notably, following the rollout of the iPhone 16, it was revealed that Arm will design the phone’s processor, a major catalyst for growth.
Arm Holdings was valued at $147 at press time, having rallied 113% in 2024.
Although these highlighted stocks have strong underlying fundamentals, their ability to attract investor interest will depend on various factors.
They will need to offer unique products to outcompete rivals, especially in a market dominated by giants like Nvidia. Additionally, the economy’s overall health will play a crucial role in shaping their trajectory.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
Source: https://finbold.com/2-ai-stocks-to-reach-250-billion-market-cap-in-2025/