Better Artificial Intelligence Stock: Verizon vs. BigBear.ai

Industry Overview - The artificial intelligence market experienced significant growth in 2024, expanding to $184 billion from$136 billion in 2023, with projections to reach $827 billion by 2030 [1] Company Analysis: BigBear.ai - In Q3, BigBear.ai reported sales of$41.5 million, marking a 22% year-over-year increase, primarily due to the acquisition of Pangiam [2] - Despite the sales growth, BigBear.ai is not profitable, posting a net loss of $12.2 million in Q3 [2] - The majority of BigBear.ai's revenue is derived from federal government contracts, indicating a reliance on government business [7] - The company secured a new contract with the U.S. Air Force, although details on revenue impact were not disclosed [13] - BigBear.ai's core business appears to be struggling, as evidenced by a 21$33.1 million prior to the Pangiam acquisition [14][19] Company Analysis: Verizon Communications - Verizon is positioned to leverage its 5G network to enhance AI capabilities on mobile devices, with new AI edge capabilities set to be demonstrated to businesses in 2025 [3][5] - The company generated $33.3 billion in revenue in Q3, remaining flat year-over-year, with a net income of$3.4 billion [20] - Verizon's strong free cash flow (FCF) of $14.5 billion year-to-date comfortably covers its dividend payments of$8.4 billion [6] - The company has a robust dividend yield of 6.7% and has raised dividend payments for 18 consecutive years, showcasing its reliability as a source of passive income [12] Investment Comparison - BigBear.ai is a younger company, having gone public in December 2021, while Verizon is a mature company with stable but slow-growing sales [10] - The price-to-sales (P/S) ratio indicates that Verizon's stock is a better value compared to BigBear.ai, combined with uncertainties surrounding BigBear.ai's growth potential [15][17] - Verizon's partnership with Nvidia aims to deliver AI to the edge, requiring advanced technical capabilities [11]