By Adam Clark

Palantir Technologies is the darling of the artificial-intelligence bulls again. The data-analytics company's upbeat call on how low-cost AI can boost its business should be good news for other software stocks.

Palantir executives hailed a future where their software is set to become the most valuable part of the AI ecosystem, compared with underlying models, following the company's earnings beat. That comes on the back of Chinese firm DeepSeek apparently demonstrating cutting-edge models can be developed for a fraction of the previously assumed cost.

"I think one of the obvious lessons of DeepSeek-R1 is something that we've been saying for the last two years, which is that the models are commoditizing," Palantir's Chief Technology Officer Shyam Sankar told analysts on an earnings call. "Yes, they're getting better across both closed and open, but they're also getting more similar. And the price of inference is dropping like a rock."

Other companies potentially placed to benefit from that shift include cloud-based data storage company Snowflake, its privately owned rival Databricks, and customer-relationship software company Salesforce.

"[Palantir's] guidance for strong 54% U.S. commercial revs [revenue] growth in 2025 is a positive signal for primarily Databricks (according to our checks, Palantir and Databricks appear best-positioned to see AI pull-through) but to some degree Snowflake," wrote UBS analyst Karl Keirstead in a research note on Tuesday.

Snowflake last year launched its own large-language model that the cloud-based data-warehousing firm claimed was the best option for enterprise AI applications. Snowflake said it trained the model in less than three months, with a budget of under $2 million.

Snowflake shares were rising 3.5% in morning trading. Another gainer was Salesforce, which was up 0.7%.

Salesforce is one of the software companies pushing ahead fastest with "AI agents," or agentic AI. The terms refer to systems that can make decisions for businesses, helping them with issues such as customer interaction.

"A lower cost of compute could bring down AI computing costs of sales and drive better margin on AI enabled offerings. More importantly, agentic application providers could pass savings on to enterprises via lower price, which could provide a catalyst for adoption/proliferation of agents," wrote BofA Securities analyst Brad Sills in a recent research note.

Salesforce plans to lay off more than 1,000 employees as it shifts focus to AI products, Bloomberg reported on Tuesday.

Write to Adam Clark at adam.clark@barrons.com

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February 04, 2025 11:17 ET (16:17 GMT)

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