TL;DR:
- Investor sentiment adjusts as revenue expectations for AI firms like MongoDB and Palantir are downgraded.
- Analyst Rishi Jaluria suggests that the realization of substantial AI revenue may be delayed until 2025.
- Concerns over privacy, regulations, and investor understanding contribute to AI market growth deceleration.
- Jaluria identifies MongoDB and HubSpot as promising AI companies despite recent downgrades.
- He highlights MongoDB’s competitive stance against Oracle in the generative AI space.
- Palantir’s ambitious claims may not align with current market realities, leading to an underperformance designation.
Main AI News:
In recent days, the investment community has shown a more measured outlook on prominent artificial intelligence (AI) companies. An industry analyst specializing in this sector suggests that people are beginning to grasp that the realization of substantial revenue from AI technology may not materialize as swiftly as initially anticipated.
Over the past week, there have been notable downgrades in the expected performance of AI firms like MongoDB and Palantir, with analysts citing overblown AI prospects as the primary reason for the revisions.
Rishi Jaluria, the Managing Director of Software Equity Research at RBC Capital Markets, expresses the view that many analysts are coming to terms with the fact that numerous AI firms may not deliver substantial revenue until as late as 2025.
Speaking in an interview with BNN Bloomberg, Jaluria stated, “I believe that the start of this year has served as a wake-up call for the AI sector. Generative AI is undoubtedly a seismic technological advancement, one that has the potential to reshape the entire business landscape, much like the advent of smartphones or the internet. However, I’m not downplaying the significance of AI; rather, I believe that investors may have been overly optimistic about how swiftly generative AI would translate into revenue.”
Jaluria cites concerns surrounding privacy and regulatory issues within the AI industry as factors contributing to the slowdown in growth. Moreover, many investors are still in the process of comprehending the full potential of this new technology, making it challenging to identify which companies will ultimately thrive in the evolving landscape.
Despite MongoDB’s recent downgrade, Jaluria sees both MongoDB and HubSpot as promising AI companies worthy of consideration for investment. He highlights MongoDB, a database platform, as a viable contender against the much larger Oracle in the quest for market share in this space. Jaluria notes, “While Oracle has made bold claims in the realm of generative AI, MongoDB is substantiating those claims with tangible results.”
Regarding data analytics firm Palantir, Jaluria conveys his belief in the company’s potential but acknowledges the rationale behind the underperformance designation. He remarks, “Palantir has been making ambitious claims to promote its product and attract retail investors. However, I believe these claims may not align with the current reality, which is why I have set a price target for Palantir significantly lower than its current market valuation.“
Conclusion:
The AI market is experiencing a recalibration of revenue expectations, as investors realize that substantial income from AI technology may be delayed until 2025. Concerns over privacy, regulations, and investor comprehension have contributed to this slowdown. While MongoDB and HubSpot remain promising AI firms, Palantir’s ambitious claims may not be supported by current market conditions. This adjustment highlights the need for a more cautious approach to AI investments in the coming years.
