3 Undervalued AI Powerhouses That Could Outperform Palantir in the Long Run

The AI infrastructure sector has been a rollercoaster in 2025. Regulatory headwinds, macroeconomic volatility, and overhyped valuations have caused many investors to retreat from the space. Yet, beneath the noise, three companies—Twilio, Arm Holdings, and Unity Software—are quietly building the foundational tools that will power the next decade of AI innovation. Their current valuations, far from their explosive growth potential, make them compelling long-term plays that could eclipse even Palantir's market trajectory.

1. Twilio: The Human-AI Interface Reimagined

Twilio (TWLO) has evolved from a communications platform to a cornerstone of AI-driven customer engagement. Its Customer AI platform now powers over 1,000 AI-generated voices in 40 languages, enabling businesses to automate personalized interactions at scale. The company's Q1 2025 revenue rose 12% year-over-year, with a forward P/E of 23—a discount to its projected 24% earnings growth.

Twilio's strategic partnerships with Google Cloud and OpenAI are accelerating adoption in sectors like healthcare and fintech, where AI-driven customer service is becoming a competitive necessity. With a 107% dollar-based net retention rate and a 7% YoY customer growth rate, Twilio's SaaS model is proving resilient. Analysts have raised their price target to $130, implying a 30% upside.

2. Arm Holdings: The Semiconductor Backbone of AI

Arm (ARM) is redefining its role in the AI era with the Neoverse, Niva, and Zena platforms, tailored for edge computing, AI inference, and autonomous systems. The company's forward P/E of 20 contrasts sharply with its projected 21% earnings growth in 2025, suggesting a significant undervaluation.

Arm's collaboration with Meta on custom CPU designs and its Project Stargate partnership with OpenAI highlight its strategic positioning. By prioritizing AI safety through Yellow Teaming methodologies and open-source initiatives like SOAFEE (for automotive software), Arm is addressing both technical and regulatory challenges. As AI chips become the lifeblood of everything from smartphones to self-driving cars, Arm's licensing model ensures it captures value across the ecosystem.

3. Unity Software: The 3D Engine for AI-Driven Realities

Unity (U) is experiencing a renaissance as the demand for real-time 3D content surges in gaming, healthcare, and automotive sectors. Its Unity Vector AI tools enable developers to integrate AI into simulations and virtual environments, a critical use case for training autonomous systems.

The company's stock has rebounded nearly 50% in 2025, driven by improved EBITDA margins and a rollback of controversial runtime fees—a move to retain developers. Analysts project 38% operating income growth in 2025, with Unity's platform aligning seamlessly with Arm's AI safety initiatives and Twilio's voice AI. As AI-generated 3D content becomes the norm, Unity's scalable infrastructure positions it to dominate the next frontier.

Why These Three Outpace Palantir

Palantir (PLTR) has long been a poster child for AI-driven analytics, but its reliance on government contracts and opaque valuation metrics make it a riskier bet. In contrast, Twilio, Arm, and Unity are building the infrastructure that will democratize AI across industries. Their business models—SaaS, semiconductor licensing, and developer ecosystems—are more scalable and less susceptible to regulatory overreach.

Moreover, all three companies are trading at discounts to their intrinsic value. Twilio's 23x forward P/E is 40% below its growth rate; Arm's 20x forward P/E ignores its 21% earnings momentum; and Unity's rebound has left its long-term potential largely untapped.

The Road Ahead

The second half of 2025 could be a turning point. Regulatory clarity around AI safety, the launch of new AI chips from Arm, and Twilio's expansion into enterprise AI workflows are key catalysts. For investors seeking long-term outperformance, these three companies represent not just a bet on AI—but on the infrastructure that will power the next industrial revolution.

As the sector corrects its first-half pessimism, now is the time to position for the AI infrastructure boom.

Final Note: The AI revolution is no longer about hype—it's about execution. Twilio, Arm, and Unity are not just participants in this revolution; they are its architects. And in architecture, the foundations are where the real value lies.