Investing

2 Fast-Growing Software Stocks That Can Outperform Palantir Stock in 2025

Joey Frenette

Published: December 12, 2024 3:52 pm

Palantir (NASDAQ:PLTR) stock has been the software high-flyer of 2024. As we transition into a new year, investors may wish to set their sights on other names that can leverage artificial intelligence (AI) in ways that could help propel quarterly earnings results above and beyond expectations as they exist today. Undoubtedly, spotting the new winners from the “next phase” in the AI race can be difficult. However, after soaring nearly 900% in just two years, I’m not so sure Palantir’s parabolic run can last long enough to help it be a winner in 2025.

Key Points About This Article

• Palantir stock is poised to cap off an unbelievable 2024. But further gains could be harder to come by.
• Salesforce and Microsoft have big AI catalysts on the horizon alongside far cheaper multiples.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Of course, I could be wrong, as Alex Karp finds new ways to grow its powerful AI Platform (AIP). I suppose Palantir’s meteoric rise could have legs, but personally, I’d much rather bet on alternative options that trade at a fraction of the cost. Further, if an AI cooldown period is looming, such less-pricey AI plays may have less room for the downside.

In any case, here are two software stocks to add to your watchlist alongside Palantir in the new year.

Salesforce

Salesforce (NYSE:CRM) just came off an exceptional quarterly earnings beat that helped propel shares as high as $361 and change per share. With Agentforce and AI agents to look forward to in 2025, I wouldn’t look for CRM stock to cool off anytime soon. With a robust ecosystem in the enterprise and a legendary CEO who’s not afraid to approach AI from a different angle, perhaps Salesforce could have what it takes to outdo not only Palantir in 2025 but all seven of the Magnificent Seven names.

Indeed, it’s easy to count Salesforce out of the AI race right here because it’s not spending as heavily as many of its rivals. That said, Benioff, who previously criticized Microsoft (NASDAQ:MSFT) Copilot, thinks there’s more to winning in AI than just pouring funds into efforts. In fact, Benioff views big tech’s spending on AI as “excessive” and thinks there will be a “race to the bottom.”

I think Benioff will be proven right. It’s not about how much you spend on AI but where you spend it. Where do Benioff and the company see an opportunity to score a good return on investment (ROI)? AI agents and its other offerings that build on top of others’ AI offerings seem to be the path Salesforce is taking. And it’s a unique path that I believe separates Salesforce from the pack. In any case, Salesforce looks like it’s setting itself up to becoming one of the leaders in profitable AI software.

At 31.2 times forward price-to-earnings (P/E), CRM shares seem way too cheap, even with the recent post-earnings spike behind it.

Microsoft

Microsoft stock has been a market laggard this year, with shares up less than 2% in the last six months and year-to-date gains of just 21%, less than the S&P 500’s 28%. Undoubtedly, the recent consolidation seems more like a buying opportunity than a sign to sell. Of course, only time will tell where MSFT shares move from here after taking a lengthy breather.

As other Magnificent Seven titans head to new heights, Microsoft should follow shortly after as the enterprise giant improves upon its AI Copilot while indirectly benefiting from the rise of ChatGPT integration on Apple (NASDAQ:AAPL) Intelligence.

Indeed, ChatGPT via Apple Intelligence has been the big story this week. And while Apple’s glowing, new iOS 18.2 has been receiving most of the attention, I do think it’s a mistake to forget about Microsoft’s role behind the curtain. It’s Microsoft’s Azure cloud that’s standing in the background, powering the requests sent from Apple Intelligence to ChatGPT.

Indeed, as tens of millions of eligible users (it’ll eventually be hundreds of millions) leverage the power of Apple Intelligence, Azure could continue to be the star of the show for Microsoft going into 2025. In any case, MSFT stock looks like a bargain here at 33.6 times forward P/E, as it looks to move on from the past few months of sideways action.

Given the catalysts and modest multiple going into the new year, perhaps MSFT may have what it takes to outrun PLTR stock in 2025. Time will tell.