Virtus Investment Partners‘ Joe Terranova is eyeing a couple of big data companies as the artificial intelligence (AI) story begins to tilt toward software.
What To Know: BofA Securities just added Palantir Technologies Inc PLTR to its top 10 best U.S. ideas list for the third quarter. Monday on CNBC’s “Fast Money Halftime Report,” Terranova explained why he remains bullish.
“It’s become a popular name when you are thinking about AI and the AI halo. They’re clearly participating,” Terranova said.
Palantir has been a beneficiary of the AI boom, but below the highs it set in early 2021. BofA obviously sees more room for Palantir to run in the near term and Terranova agrees.
Palantir has had significant exposure to government contracts for a long time. Growth in the commercial side of the business is really starting to boom, Terranova said.
AI is playing a big role in that growth, he added.
“You are seeing the growth in revenue attributable to [AI] beginning to build. It will further build in the upcoming quarters. Palantir has really been a strong momentum name in a software environment that’s been somewhat experiencing friction,” Terranova said.
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Many expect AI software names to catch up to some of the hardware names that have benefitted the most from the AI race. Terranova suggested that he’s positioning for the move by adding Datadog Inc DDOG to the portfolio.
Datadog is in a critical area of AI that many are not focused on yet: security. The company offers cloud-based security monitoring for applications, which will be “incredibly important” in terms of usage from the enterprise community, Terranova said.
“I think a lot of people dismissed software,” he adds. “I get the premise that AI disrupts a lot of the existing product in the software business itself … but I also think you have to be aware that there might be a bottoming process that’s unfolding for software.”
Terranova told CNBC that Datadog is also starting to break out above critical levels from a technical perspective. Expect momentum to stay for a while, he said,
PLTR, DDOG Price Action: Palantir shares were up 2.15% at $25.86 on last check Monday. Datadog shares were up 1.29% at $131.37, according to Benzinga Pro.
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