If substantial gains from NVIDIA (NVDA.US), the absolute leader in AI Chips, which surged 240% in 2023 and is expected to rise further by 180%, were missed this year, do not be too discouraged. The story of AI is far from over, and by 2025, a new chapter for software giants could begin, as market attention will continue to shift from semiconductor giants like NVIDIA (NVDA) to disruptors in the software industry. Since September, the market focus has gradually shifted to Salesforce, ServiceNow, Palantir, AppLovin, and other leading software companies that can capitalize on AI to create unprecedented revenue engines.

There is no doubt that NVIDIA remains the perfect answer to the current phase of "AI Infrastructure Spending". NVIDIA's flagship AI GPUs—H100/H200 and the upcoming mass-produced Blackwell architecture AI GPU—provide the core driving force for AI training/inference systems, while software giants are preparing to leverage these hardware engines to significantly enhance business and individual consumer operation efficiency. Starting in 2025, AI applications led by AI agents are expected to accelerate their penetration globally.

AI application software undoubtedly represents a groundbreaking generative AI model—specifically the core technology behind ChatGPT—penetrating the core carriers of human life, capable of significantly improving business operation efficiency as well as personal work and learning efficiency. The field of AI application software includes all software products that use AI technology, particularly generative AI, to address real-world problems, possessing capabilities in natural language processing, predictive analysis, efficiently resolving user queries, or automating tedious tasks, thus providing tangible value to businesses or individuals, such as enhancing efficiency and optimizing cumbersome workflows.

From the AI revenue data and performance outlook of software giants like Palantir and AppLovin, the recent investment wave surrounding software stocks is certainly not "mindless speculation", but rather a market bet that software companies will have performance data several times stronger than current levels as core pillars under the epic AI boom, and software stocks are likely to lead the AI investment wave comprehensively. These software giants' earnings reports indicate that AI application software products are accelerating their penetration into major enterprise clients, and this momentum may last for at least 2-3 years, ultimately leading AI applications to cover an increasingly large consumer user base.

"Now is the time for a broader software field to join the AI investment feast, as we believe AI use cases are experiencing explosive growth," wrote a team of analysts led by Daniel Ives from the well-known Wall Street institution Wedbush in a report on December 26. "Starting in 2025, the enterprise-level AI application consumption phase will be completely in front of us."

AI MMF may bring another growth story, with software stocks taking the spotlight.

The analyst team at Wedbush wrote: “The full rollout of AI LLM (AI Large Language Models) and real use cases of generative AI will become important catalysts for key players in the software industry and the AI field, shifting market focus from Semiconductors to Software, allowing them to benefit from the historic Fourth Industrial Revolution, a new industrial revolution that will benefit the Technology sector.

According to this report led by Ives' Wedbush analyst team, which companies stand to gain the most from this significant shift? Wedbush's answer is Palantir (PLTR.US) and Salesforce (CRM.US).

Palantir - the Macy's of the AI industry.

In Wedbush's opinion, Palantir is “the Macy's of the AI industry.” Palantir is highly favored in the AI and data analytics field, with its stock price quadrupling since the beginning of the year.

Focusing on the “AI + Data Analytics” data software giant, Palantir can be regarded as a “top performing AI stock,” with its stock price repeatedly reaching historical highs this year, an increase of 360% year to date. Palantir's Q3 revenue significantly exceeded analysts' expectations and raised the revenue outlook for the period, mainly due to the growing demand for its generative AI-based Application software from the U.S. federal government and businesses. Palantir's Q3 revenue was $0.726 billion, growing 30% year-on-year, far exceeding expectations, with net income nearly doubling to set a new record for the company; more importantly, Palantir expects a substantial increase of over 50% in U.S. commercial revenue in 2024.

Palantir的生成式AI平台“AIP”与Palantir现有数据分析软件生态系统全面集成，客户可以通过简单问答的方式调用Palantir核心模块和功能，使企业组织能够有效地将生成式人工智能应用于数据分析，提高洞察力和运营效率。该平台支持一系列人工智能技术驱动的应用，从物料短缺自动化管理、物流和供应链优化到预测性维护和威胁检测等复杂算力场景。

The surge in Palantir's stock price is primarily driven by the company's expanding influence in the AI field and the increasing market demand for its unique AI technology and AI applications. Palantir's largest clients are the U.S. government, while also earning substantial revenue from major companies, such as the European aviation giant Airbus, which produces jet aircraft, and the German Medical Care giant Merck KGaA.

Wedbush notes that while the company's government business is substantial, it is expected that enterprises will become the primary driver of IT spending by 2025.

Wedbush stated: "In the AI revolution, Palantir has always been a focal point. As its flagship product's AI application scenarios continue to expand, the partner ecosystem is also growing stronger, and the market demand for an enterprise-level and enterprise-applicable 'data analytics + generative AI platform' is rapidly increasing."

"As more and more companies embark on the AI journey with Palantir, this will become the major growth driver for Palantir's business in the USA over the next 12 to 18 months," the institution added. "In the next decade, with AIP leading the way, Palantir has a reliable path to becoming the next Oracle, although many Analysts on Wall Street remain skeptical about AI's potential."

Palantir joined the NASDAQ 100 Index on December 23, and it is currently one of the best-performing stocks in the index this year.

Wedbush reaffirmed its "Outperform" rating for Palantir over the next year. Despite Wedbush being extremely optimistic about Palantir's growth prospects, its high valuation has raised cautious sentiments among some Wall Street Analysts.

In December, UBS Group and Baird began coverage of the stock with a "Neutral" rating, emphasizing that valuation concerns are a significant factor in Wall Street's cautious approach.

The stock has an expected PE of up to 163x, whereas the expected PE for the S&P 500 Index is only 24x.

Salesforce: Undoubtedly one of the big winners in the AI frenzy.

Wedbush noted that as the AI revolution enters the software sector, Salesforce has adequately prepared to seize significant opportunities in the rapidly expanding software market, stating that this will be a major opportunity in the $7 trillion digital labor market.

Salesforce has recently shifted its business focus towards AI application software centered around "Einstein Copilot," as well as using AI agents to help businesses connect with their customers.

On December 17, Salesforce launched its latest digital workforce platform, Agentforce 2.0, which "makes autonomous AI agents a part of every team, allowing every employee to collaborate with Agentforce in applications like Slack."

The newly launched Agentforce is an entirely new comprehensive AI software platform, featuring high customizability, designed to provide highly customizable autonomous AI agents, whose AI reasoning capabilities and ability to automate complex and tedious tasks far exceed that of Einstein Copilot, and it can connect enterprise data to execute various tasks easily in sales, service, marketing, and other fields. Agentforce allows users to create fully autonomous AI agents that can independently perform complex tasks without ongoing human intervention. These agents can make decisions using enterprise data and Salesforce's core application software framework, handling a wide range of tasks from simple to extremely complex.

The urgent demand from enterprises to improve efficiency and reduce operating costs has greatly promoted the widespread application of AI agents recently. AI agents can automate repetitive tasks, perform Big Data analysis and aggregation based on extremely powerful AI models, provide real-time monitoring insight reports, and make suitable decisions in a very short time for extremely complex situations, thereby enhancing operational efficiency. The logic of efficiency improvement is fundamentally similar for individual learning and work efficiency. AI agents can also participate efficiently in large-scale projects across various fields globally, from blueprint planning to implementation, significantly accelerating project progress.

Analyst Tyler Radke from Citigroup remarked in a recent report regarding Salesforce's development prospects: "Salesforce's AI agent tools are beginning to replace the narrative logic of traditional Customer Relationship Management (CRM) software."

According to reports, Salesforce's Agentforce has major clients including IBM, Finnair, Accenture, and Heathrow Airport. They are utilizing this AI agent platform to enhance team capabilities, optimize operational processes, and uncover new growth opportunities, Salesforce stated.

Wedbush commented: "Agentforce 2.0 aims to enable AI to perform advanced operations for humans and integrate higher levels of trust within AI agents, thus paving the way for a new era focused on the digital workforce market."

Focusing on the customer relationship management (CRM) software field, the cloud software giant Salesforce posted quarterly earnings data that surpassed market expectations, driven by revenue growth from AI application software. After several consecutive quarters of extremely disappointing performance, the company reported an 8.3% year-on-year sales increase for the third quarter ending October 31, reaching $9.44 billion, exceeding Wall Street analysts' average forecast of approximately $9.35 billion. Salesforce expects the sales range for the next quarter ending in January to be approximately $9.9 billion to $10.1 billion, indicating a year-on-year growth of 7% to 9%. Additionally, Salesforce unexpectedly raised its lower-end revenue guidance for the fiscal year 2025, currently projected to be between $37.8 billion and $38 billion, surpassing Wall Street analysts' general expectations.

This established American software giant has seen its performance "revived" as it regains its growth curve, along with management's positive outlook for the future, which undoubtedly enhances investors' confidence that the company's heavily promoted AI Application software strategy will improve actual performance. Salesforce's stock price has surged by 35% this year, far exceeding the S&P 500 Index, with the increase nearly concentrated in the second half of this year. The current stock price hovers around its historic highs, with a Market Cap reaching 325 billion dollars.

Salesforce's Executive Vice President Mike Spencer stated in an interview after the earnings announcement that Salesforce has signed a "large number" of enterprise transactions related to its AI Agent product—Agentforce. He added that these transactions are still in the preliminary stage and the growth expectations for the future are very optimistic, but it will take some time for this to be reflected in the company's earnings reports.