This small-cap artificial intelligence play has some competitive strengths in its niche, but is that enough?
There’s no denying the advent of artificial intelligence (AI) has gotten investors’ attention. AI hardware is Nvidia‘s breadwinning business now, and it’s currently Microsoft‘s top growth driver. Software companies like C3.ai help companies do something constructive with all the digital data they regularly gather.
So where does BigBear.ai Holdings (BBAI -13.87%) fit into the picture?
A mixed picture
Like C3.ai, BigBear.ai’s platforms allow enterprises and government entities to manage themselves more effectively through the use of artificial intelligence. Most of the company’s revenue stems from government contracts, including military customers such as the U.S. Air Force.
Revenue was flat last year at $155 million. And while management is guiding for stronger growth in 2024 with revenue of $195 million to $215 million, much of it comes from BigBear.ai’s recent acquisition. Analysts expect top-line growth to decelerate again in 2025.
This relatively sluggish growth pairs with two other headwinds that prevent BigBear.ai from being a compelling AI stock pick.
First, it remains unprofitable and is expected to remain in the red through at least through 2027.
And second, with a market capitalization of about $400 million and trailing-12-month revenue of only $155 million, BigBear.ai is significantly smaller than most of its AI-focused rivals like the aforementioned C3.ai or Palantir Technologies. This limits the amount of investment and resources it can use to develop new solutions or market its tech to new customers.
BigBear.ai stock probably isn’t right for you
None of this is to suggest you can’t make money with BigBear.ai stock.
From a risk-versus-reward perspective, though, BigBear.ai doesn’t have the growth or positioning to stand out as a top choice for investors looking for exposure to AI. There are far more promising options from this industry that don’t require investors to stomach the volatility BigBear.ai has endured in 2024 alone.
James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends C3.ai and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
