Palantir Technologies (NYSE: PLTR) is one of the hottest stocks of 2024, but I think there is another hot artificial intelligence (AI) software stock that investors should consider as well. AppLovin's (NASDAQ: APP) stock price is up more than 650% so far this year, far outpacing the stellar 250% gain seen in Palantir's stock (all returns are as of this writing).

While Palantir is getting plenty of attention because its data collection, analytics, and AI platform are being used successfully by the U.S. government as well as several commercial entities, AppLovin's business has flown under the radar. The company owns a legacy gaming app business, but its core business involves advertising technology used by mobile gaming companies and others to attract and better monetize users.

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Let's take a closer look at why investors should consider investing in this stock even after its huge gains this year.

AppLovin is seeing huge growth

AppLovin has generated spectacular revenue growth since the launch of its new AI-powered adtech platform Axon-2 (introduced in Q2 2023). That growth continued last quarter, when its software revenue surged 66% year over year to $835 million, while its overall revenue climbed 39% to $1.2 billion.

Just as important as the revenue growth, the company has also seen a lot of operating leverage in its business as well, which is leading to even stronger profitability growth. Last quarter, gross margins improved to 77.5% from 69.3% a year ago, while it lowered its sales and marketing spending by 3%.

This led AppLovin's earnings per share (EPS) to more than quadruple from $0.30 a year ago to $1.25, while its adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) soared 72% to $722 million.

Eventually, the company expects to settle into long-term revenue growth of between 20% to 30% from just its gaming customers, although if it can move its adtech platform beyond its core gaming vertical, there is certainly an opportunity for its growth to continue to exceed its long-term target. The company has also said that it can grow beyond 30% a year in the gaming segment if it can start to implement more than one major enhancement to its adtech platform a year.

Outside gaming, AppLovin just started piloting its adtech platform within the broader e-commerce sector. It said results thus far are good, and it thinks e-commerce can be a meaningful contributor as early as next year. It will open a broader self-serve platform in the coming quarters.