A bull market is here: 2 artificial intelligence (AI) stocks down 18% and 41% to buy right now

Even with some periods of volatility, stocks are seeing strong bullish momentum in 2024. S&P 500 the index is already up about 18% year-to-date, and much of the impressive growth continues to be driven by gains for high-profile artificial intelligence (AI) players.

But while mega-cap companies including Nvidia, Microsoftand Apple have risen to new valuation highs this year, there are still some fantastic AI stocks trading at substantial discounts compared to previous valuation peaks.

With that in mind, read on to see why two Motley Fool contributors think you should pounce on these tech companies that have what it takes to be winners.

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Palantir’s growth engine just keeps getting stronger

Keith Noonan: It caused interest rates to rise rapidly and growth to slow Palantir Technologies (PLTR -0.44%) the stock would drop to a low of around $6 a share in December 2022, but has since rebounded. The share price is up 86% in trading this year alone and is far from low risk, trading at 90 times this year’s expected earnings.

On the other hand, Palantir shares are still down 18% from their peak, and the stage may be set for the analytics and intelligence software company to hit new highs.

Palantir has posted reliable profits since 2023, and the company’s sales growth has returned to accelerating at an attractive pace. With its second-quarter report, the company posted a 27% year-over-year increase in sales and an 80% increase in adjusted earnings per share (EPS).

The big data analytics leader has racked up wins in both the government and private sectors, and it looks like the business will continue to post impressive margins and see its growth grow even higher.

Palantir began as a provider of analytics and intelligence software services to government clients, but the company’s work in the private sector has been a rising star for the past two years. Revenue from commercial customers grew 33% in the second quarter, and the segment accounted for 45% of total sales in the period.

Aided by strong demand for the company’s artificial intelligence platform (AIP) software suite, the commercial segment will soon be Palantir’s largest. Given that private sector growth has consistently outpaced public sector clients in recent years, this presents an encouraging outlook. And it’s even better when you break trends in the commercial customer segment.

Sales to US commercial customers increased 55% year-over-year to $159 million in the second quarter, accounting for approximately 52% of total commercial segment revenue. Sales to US companies now account for more than half of the segment’s total revenue and are growing well above the overall category. In other words, growth in the commercial segment should continue to accelerate and contribute to overall revenue growth.

And as exciting as things look for the private sector, Palantir’s public sector growth is also strong. Sales to government customers rose 23 percent year over year, up from 16 percent in the first quarter of this year.

The company’s growth engine has never looked stronger. Given impressive margins and still managing to scale quickly, Palantir stock has real potential to outperform.

The market is underestimating Trimble’s growth potential

Lee Samaha: Workflow technology company Trimble (TRMB 1.68%) recently posted second-quarter earnings that were well-received, but shares continue to trade nearly 41% off their all-time high. The company provides the hardware for precise positioning and the software and services to plan and model daily workflows, while using advanced data analytics to optimize operations.

The productivity improvement offered by its technology makes it attractive to customers at any stage of the cycle. However, this year has seen some challenging end markets, not least in transport, where significant overcapacity in the freight market is slowing final demand.

It’s a different story in its core Architects, Engineers, Construction and Owners (AECO) segment, where annual recurring revenue (ARR) rose 18% year-over-year in the second quarter. Two-thirds of the growth came from existing customers and one-third came from new customers as its solutions help reduce waste and maximize execution in construction projects.

With Trimble selling more and more software and subscription services on a recurring basis, the company’s profit margins and cash flow conversion continue to grow. This trend is very likely to continue as improvements in data analytics (Trimble is incorporating AI capability into its products, for example) means more added value for its customers.

As such, it is becoming an increasingly important part of its customers’ daily workflows, which should provide the opportunity to sell them more services. Trimble is set to grow its ARR by 11% to 13% in 2024 and potentially stronger economics in 2025, which could grow further for a company with a bright future.

Trading at a significant discount, Trimble stock looks like a smart buy right now.