Several weeks ago, I wrote about the growing popularity of Wall Street’s latest buzzword: Artificial intelligence, or “AI.”

It seemed that any stock that mentioned “AI” in their earnings call would get a nice little pop.

Honestly, it was getting a little ridiculous.

In that piece, I said that this mania was going to lose investors a lot of money. But if you remember, I said it wasn’t because of AI technology itself. In fact, I said that this game-changing technology would revolutionize many industries and transform our lives over the next few years.

And what’s more, I said that there would be legitimate ways for investors to profit.

Fast-forward to today, and there’s one stock that has been among the market’s best performers lately. And unlike others, it actually has something to do with AI.

Let’s take a look…

The Latest AI Darling

Software company Palantir Technologies (Nasdaq: PLTR) was founded in 2003 by Peter Thiel (co-founder of PayPal) and a few other partners.

Fun fact: the name “Palantir” is inspired by a mystical seeing stone from J.R.R. Tolkien’s “The Lord of the Rings” series, which could be used for communication and seeing events from afar.

The company’s primary focus is on developing software platforms for data integration, analysis, and visualization. Its flagship product, called Palantir Gotham, is used primarily by government and intelligence agencies for data analytics, counterterrorism, intelligence analysis, and other security-related applications. Roughly 56% of Palantir’s sales come from government contracts.

Its two other software platforms are called Foundry and Apollo, which are primarily used by its commercial customers.

What’s Behind The Momentum?

Last year, Palantir pulled in over $1.9 billion in sales, a 23.6% improvement over 2021. Analysts estimate the company will do more than $2.2 billion this year.

The company hasn’t posted a profitable year yet, but that’s expected to change this year. Estimates are calling for net income of over $460 million, which would be a big improvement over the $374 million loss it had last year.

Cash flow, however, has been solid over the last couple of years. Last year, the company generated $258 million in cash flow. This year, it’s expected to do more than $460 million in cash flow.

After a couple of dud years in terms of performance, shares of Palantir have taken off (shares have more than doubled since the beginning of the year).

Why? To put it simply, part of it is because of the AI buzz.

AI has been around for years, but it wasn’t until ChatGPT came out that really allowed us (consumers) to see what it’s capable of. And now any company associated with AI is taking off.

But Palantir was part of the AI revolution before it was fashionable. It has more than two decades worth of experience in the field.

Just take a look at Palantir’s chart:

Closing Thoughts

Even though I’ve previously warned of chasing AI stocks, I also said that there would likely be ways to profit from this craze.

This is one of them.

That said, there are a couple of things to keep in mind. First, the company has been the subject of public debate and controversy due to concerns about privacy and data usage. Also, if Wall Street moves on from AI, then you can expect many AI-related stocks to lose their luster.

That said, PLTR has a ton of momentum, generates strong cash flow, and could provide investors even more gains in the weeks ahead. Provided you use some downside protection (like a trailing stop-loss), it looks like a worthwhile candidate for growth-minded investors.

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