The AI boom has reshaped entire industries, minting new winners in the process.
But the gains are not without risk, as witnessed by the recent sell-off.
After a fairytale run, has the AI growth story ended?
Here’s the truth: as valuations run ahead of earnings, a shift in sentiment can easily trigger pullbacks, even if AI adoption continues unabated.
Let’s explore some businesses whose long-term AI theses remains intact despite market volatility.
Palo Alto Networks (NASDAQ: PANW) or PAN – Cybersecurity’s AI Shield Still Standing Strong
The dark clouds of the SaaSpocalypse have punished Software-as-a-Service (SaaS) companies mercilessly.
But is PAN susceptible to AI disruption as a provider of SaaS-delivered cybersecurity?
The cybersecurity firm’s latest financials suggest it’s not.
In the second quarter ended 31 January 2026 (FY2026), total revenue grew 15% year on year (YoY) to US$2.6 billion, while net income increased by nearly 62% YoY to US$432 million, supported by robust demand for its platformised cybersecurity solutions.
PAN’s management has contended that its security services are indispensable — in their own words, an “enabling layer” for enterprises to safely transition from AI experimentation to full-scale integration.
Moreover, as malicious actors increasingly move at “machine speed”, enterprises counter them with PAN’s security platform that provides a unified, coordinated real-time, defence strategy.
The company’s products are well-received.
- Prisma AIRS, a universal AI security tool for enterprises’ AI models and apps, tripled its quarterly customer count.
- Cortex XSIAM, the central brain of Security Operations Centres (SOC), crossed the US$0.5 billion Annual Recurring Revenue (ARR) milestone, reducing customers’ mean time to remediation from days to mere minutes.
- 200 of its XSIAM customers enabled AgentiX, empowering them to build a workforce of autonomous agents capable of executing at machine speeds.
Despite its stock plunging with other SaaS-related businesses, PAN’s AI-powered cybersecurity platform solution remains widely adopted.
Palantir Technologies (NASDAQ: PLTR) – Operational Leverage Over Commoditised AI Services
The abundance of AI models has produced many commoditised AI services.
But not Palantir.
The AI firm offers the operational leverage to address the byzantine complexity of a modern enterprise.
The secret sauce?
Ontology – the software architecture that lends an organisation-specific “grammar and structure” to the probabilistic outputs of these AI engines.
What follows is a unified working architecture based on the organisation’s semantics while being operationally tethered to the real world.
Instead of “How can I help you?”, Palantir’s value proposition is “Here’s what should be done based on the current context”.
Such unique capabilities could render other commoditised AI services obsolete.
In the fourth quarter of 2025 (4Q2025), total revenue surged 70% YoY to US$1.41 billion, driving its adjusted operating margin up 12 percentage points compared to a year ago to 57%.
This explosive growth, resulting in a stellar “Rule of 40” score of 127%, attests to Palantir’s AI thesis remaining intact through its differentiated offerings.
Microsoft (NASDAQ: MSFT) – The Best Is Yet to Be
Microsoft is one of the key enablers of the AI boom that is hard to ignore for investors looking for AI-investment themes.
In the second quarter ended 31 December 2025 (2QFY2026), revenue climbed 17% to US$81.3 billion, with net income rising 60% YoY to US$38.5 billion, driven by its improving cloud business and strong demand for its portfolio of services.
The tech giant’s strategy is multi-layered, consisting of:
- Its “Cloud and Token Factory”, which forms the foundational AI infrastructural layer.
- The “Agent Platform”, which provides tools for developers.
- Its “High Value Agentic Experience”, which provides end-users with AI features by integrating Copilot into its applications.
The result? Operational efficiency.
Specifically, “tokens per watt per dollar” is optimised, leading to 50% more AI inference data being processed per unit of resources.
Crucially, Microsoft is not just beating performance metrics.
Microsoft 365 Copilot adoption is rising, with paid seats growing over 160% YoY in 2QFY2026.
Despite heavy AI investments spooking investors into dumping their shares, Microsoft’s operating margins surged 47% in 2QFY2026.
The best is yet to be, with management expecting operating margins to inch up “slightly” in FY2026.
Get Smart: Position for the Next Wave, Not the Current Washout
This is not the first time the market has pulled back, and it will not be the last.
The above-mentioned names operate with durable moats:
- PAN leverages AI to counter threats that escalate at machine speed.
- Palantir turns probabilistic AI outcomes into operational decisions and actions.
- Microsoft scales the AI infrastructure, encouraging AI adoption while benefiting its own ecosystem.
Instead of reacting to the current washout, investors should focus on positioning themselves based on substance over sentiment.
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Disclosure: Larry L. owns shares of Palantir and Microsoft.
