Better artificial intelligence (AI) stock: Palantir vs. BigBear.ai

The promise of Artificial Intelligence often feels like a gold rush. Every investor seeks the next big winner, but how do you distinguish fleeting hype from enduring value? With the AI software market projected for a staggering 36% compound annual growth rate through 2030, finding the right investment can redefine your financial future. Two companies, Palantir Technologies and BigBear.ai, aim to capitalize on this boom. But if you're selecting just one for your portfolio, a deeper look reveals a clear choice.

Palantir: The AI Platform Driving Real-World Transformation

Palantir stands out as a recognized leader in AI software platforms by research firms like Forrester and IDC. This industry validation translates directly into impressive business expansion.

Expanding Customer Base and Deepening Relationships

In the second quarter of 2025, Palantir's overall customer count surged by 43% year over year. More significantly, the tangible productivity gains its AI solutions deliver are encouraging existing clients to invest further. This is evident in the company closing 157 deals worth at least $1 million last quarter, a robust 64% increase from the prior year, outpacing its general customer growth.

Consider these real-world impacts: Citibank, a Palantir customer, reduced its customer onboarding and security checks from nine days to mere seconds. Fannie Mae, leveraging Palantir's platform, slashed the time to detect mortgage fraud from months to seconds. These aren't just incremental improvements; they represent fundamental shifts in operational efficiency and risk management, solidifying client loyalty and expanding Palantir's footprint.

Robust Financial Outlook

This deep value proposition underpins Palantir's strong financial projections. Analysts forecast a 45% revenue spike for 2025, with earnings per share (EPS) expected to jump 57% this year, followed by continued impressive growth. Palantir's ability to consistently gain more business from its established customer base positions it as a resilient force in the secular growth of the AI software market, capable of justifying its current valuation with sustained, high-quality growth.

BigBear.ai: A Growth Story with Caveats

BigBear.ai also offers AI software solutions designed for enhanced decision-making, and its stock has seen a significant rally. On the surface, it might appear to be a more "affordable" entry into the AI space, trading at approximately 9 times sales compared to Palantir's much higher trailing price-to-sales ratio.

Backlog Versus Realized Revenue

The company reported a growing revenue backlog of $380 million in Q2, a 43% increase from the previous year. This metric might suggest future growth. However, a closer examination reveals inconsistencies. Despite the backlog, BigBear.ai's revenue actually declined by 18% year over year in Q2 to $32.5 million. This disparity highlights a crucial point: a backlog does not always translate directly or predictably into revenue, especially with the caveats associated with government contracts.

Dependence on Government Contracts

BigBear.ai relies heavily on government contracts for the majority of its revenue. This dependence exposes the company to the vagaries of government budgets and policy shifts, leading to significant volatility. This was starkly illustrated when the company was compelled to lower its 2025 guidance to $132.5 million, a figure lower than its $158 million revenue in the prior year, causing its stock to plummet post-earnings. While a lower valuation can be appealing, it means little if the growth story lacks consistent execution and predictability.

The Verdict: Investing for Sustainable AI Leadership

When weighing Palantir against BigBear.ai, the choice becomes clear for investors seeking robust, long-term exposure to the AI revolution. Palantir, despite its premium valuation, demonstrates consistent growth, undeniable market leadership, and a proven ability to deliver quantifiable value to its expanding client base. Its platform drives critical productivity gains, ensuring continued investment from its customers and a predictable growth trajectory.

BigBear.ai, conversely, faces structural challenges tied to its reliance on government contracts and exhibits inconsistent revenue performance despite its backlog. The appeal of a lower price-to-sales ratio diminishes when the underlying business struggles with revenue conversion and external dependencies.

For strategic investors, Palantir offers a more compelling opportunity to tap into the foundational shifts brought by AI. It’s not just about investing in AI; it's about investing in the companies that are demonstrably shaping its future. Choose growth driven by intrinsic value and market dominance.