3 Top AI Software Stocks That Aren't Palantir

Since artificial intelligence (AI) stocks have taken the investing world by storm over the past year, the outsized share price gains among some of the most popular names in the group have left some market-watchers feeling a little wary. Major AI players like chip designer Nvidia (NVDA) and social media giant Meta Platforms (META) have been the subject of heated debates about their valuations, and software specialist Palantir Technologies (PLTR) still has a lukewarm “Hold" rating from Wall Street, despite crushing expectations in its latest earnings report earlier this month.

Outside the roster of usual suspects that encompasses Wall Street's best-known AI stocks, there are still some “Buy”-rated companies that have plenty of upside potential, according to analysts. For investors seeking new ideas in the AI space, here's a closer look at three analyst-recommended AI software stocks.

AI Stock #1: Dynatrace Inc.

Dynatrace Inc. (DT) is a global technology company providing software intelligence to enterprises accelerating digital transformation by steaming down cloud-based complexity. It offers cloud operations, DevOps, IoT monitoring, and more related services to its clients. Operating in North America, Africa, Latin America, Asia-Pacific, the Middle East, and Europe, Dynatrace has a diverse client list from sectors including healthcare, retail, financial markets, transportation, and government enterprises.

DT stock is down 4.9% so far this year, with the shares pulling back after a solid rally of 42.8% in 2023. 

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Dynatrace released its fiscal Q3 results on Thursday last week, where it reported revenue of $365.1 million, up 22.7% YoY. That figure beat analysts' estimates, though billings came up short of expectations at $437.6 million. Non-GAAP EPS arrived at $0.32 against an estimate of $0.28 per share, but the ARR guidance midpoint for 2024 of $1.490 billion missed the consensus forecast of $1.499 billion. 

DT stock is off more than 14% since the earnings release, providing a potential buying opportunity. 

Analysts expect the price to rise from here, with the mean price target of $61.60 reflecting an upside potential of 18.5%. Out of the 26 analysts watching the stock, the consensus rating is a “Strong Buy,” with 19 giving the stock their top rating, 2 more handing out a “Moderate Buy” rating, and 5 with a “Hold” rating on DT. 

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AI Stock #2: Symbotic Inc.

Symbotic Inc. (SYM) is an automation tech company focused on developing and improving operating efficiency. It develops, markets, and distributes innovative end-to-end, AI-powered solutions for warehouse management. Operating primarily in the U.S. and Canada, Symbotic enables companies to tap into unmatched levels of efficiency, transforming the flow of goods and supply chain for its customers. 

Symbotic’s stock is down 12% YTD, but more than quadrupled in value over the course of 2023, gaining a mammoth 329%. 

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Symbotic posted its fiscal Q1 results on Feb. 5, and received a similarly chilly reception as DT to its quarterly figures. 

SYM reported revenue of $368.5 million, reflecting a 79% rise YoY - but the top-line growth still missed estimates. System revenue, which accounts for 97% of SYM's total revenue,, surged 80% YoY to $356.2 million, while the Software maintenance and support sector generated $2.2 million in revenue. On the other hand, the loss per share of $0.02 was narrower than the anticipated $0.05 per share loss.

After earnings, SYM stock fell a sharp 23.5%, creating an opportunity to buy the dip. 

Analysts are bullish on Symbotic, with a consensus “Moderate Buy” rating and a mean price target of $54.00 - signifying a 19% upside potential from current levels. Out of the 13 analysts covering the stock, 8 have a "Strong Buy” rating, 2 have a “Moderate Buy” rating, and 3 have a “Hold” rating on the stock. 

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AI Stock #3: FiscalNote Holdings, Inc. 

FiscalNote Holdings, Inc. (NOTE) combines AI, machine learning, and more to create workflow tools, analytics, and expert research, which helps its customers by providing critical insights. Operating in North America, Europe, Asia, and Australia, NOTE's clients run the gamut to include Fortune 100 companies, government institutions, trade groups, law firms, and more. 

FiscalNote’s shares are currently trading at $1.40, as the stock has gained 28% YTD.

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FiscalNote released its most recent earnings report back in November, where it posted a loss of $0.11 per share - narrower than the loss of $1.39 it reported in the year-ago quarter, and topping analysts' expectations. Revenue rose 17% YoY to $34 million, but fell slightly short of the consensus estimate.

For Q4, revenue is expected in the band of $34 million and $35 million, with adjusted EBITDA of $2.5 million. For the full fiscal year 2023, NOTE expects GAAP revenue of $132 million to $133 million, up 16-17% YoY, with an adjusted EBITDA loss of about $8 million, which would mark a 67% YoY improvement. The company is set to report earnings again in March.

Analysts are optimistic, with a consensus “Moderate Buy” rating and a mean price target of $3.78 - signifying a 160% upside potential to current levels. Of the 6 analysts tracking the stock, 4 have a “Strong Buy” rating and 2 have a “Hold” rating on the stock. 

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On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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