Palantir's AI-Driven Growth Sparks Debate on Future Valuation

Should You Buy Palantir Before Dec. 23? | The Motley Fool

Palantir Technologies (PLTR -0.42%) has reached many major milestones this year. The company joined the prestigious S&P 500 index back in September, proving it's now one of the major players driving today's economy. And in the most recent quarter, this 20-year-old business generated its biggest profit ever following quarter after quarter of double-digit revenue growth. The stock price has reflected all of this and more, and today, Palantir is heading for a mind-blowing 340% annual gain. That makes it the best performing stock in the S&P 500 for the year. Why such success? Palantir launched its Artificial Intelligence Platform (AIP) a year ago, and demand from governments and commercial customers has taken off. The company, through its technology, helps its customers aggregate all of their data and make better use of it -- and often the results are game-changing. And the excitement may not be over for Palantir even in these final days of the year. Last week, the company was invited to join the Nasdaq 100, and it will officially enter the index on Dec. 23. Should you buy the stock before that big moment? Let's find out. First, let's take a closer look at Palantir and its progress over the past few years. The company has been around for a long while, as mentioned, and primarily was associated with government contracts. But in recent times, the commercial customer has discovered the power of Palantir's platforms, and AIP has cemented this trend. Customers from United Airlines to Wendy's are using AIP to gain in efficiency and make decisions that could save them millions of dollars. And in recent quarters, U.S. commercial customer revenue has climbed in the double digits -- it rose 54% in the most recent period. A look at where the company stood in terms of commercial customer count just four years ago and where it stands today is particularly impressive and illustrates the strength of demand. Then, Palantir had 14 U.S. commercial customers, and today, it's reached almost 300. At the same time, government customers continue to represent significant growth too, maintaining double-digit levels. In the most recent quarter, U.S. government revenue climbed 40%. This shows that the traditional revenue source still is generating growth for Palantir even as the new growth driver -- the commercial customer -- is strengthening. That's an ideal situation. On top of this, Palantir said that in the recent quarter more than 100 deals that closed were valued at more than $1 million -- so in many cases, customers are making a big investment in their work with the company. It's no surprise that Palantir recently reported its biggest profit ever and that major indexes are inviting the software company to join. Now let's consider whether you should buy the stock prior to its entry in the Nasdaq 100 on Dec. 23. One thing in particular could support share performance following its entry. Funds that track the performance of the Nasdaq 100 must replicate the index's composition, so those funds will be buyers of Palantir. Though this is positive, it's unlikely to send the stock skyrocketing. At the same time, it's important to remember that you're more likely to win in investing if you buy and hold for the long term -- and if you do, short-term movements won't impact your returns by much. So, this means you don't absolutely have to rush out and buy Palantir before its Nasdaq 100 entrance. Now this leads us to one more question: Is Palantir a buy? The one problem with Palantir today is valuation, as it trades for 200 times forward earnings estimates. This may look steep, but if we consider the company's earnings growth rate -- and we can do this by looking at its forward PEG ratio -- the story looks different. A company may be overvalued if its PEG ratio is greater than 1.0, but Palantir's is 0.6, so by this measure, Palantir still could be a solid buy for investors focused on growth. All of this means that today, even after Palantir's enormous gains, it still makes a top artificial intelligence buy for investors -- to get in on before or after its debut in the Nasdaq 100.

Is Palantir Going to Plunge 50% (or More)? History Offers a Blunt Answer. | The Motley Fool

Market leaders of next-big-thing trends are known for their parabolic climbs -- as well as their inevitable retracements. It's been a phenomenal year for Wall Street and investors. Whereas the stock market's major indexes have historically averaged annual returns that range from the high single digits to around 10%, the ageless Dow Jones Industrial Average, benchmark S&P 500, and growth-propelled Nasdaq Composite have respective rocketed higher by 16%, 27%, and 33% on a year-to-date basis, as of the closing bell on Dec. 13. While the latest leg of this bull market rally has been fueled by Donald Trump's November victory, the lion's share of this two-year ascension for the major stock indexes can be attributed to the artificial intelligence (AI) revolution. The ability for AI-fueled software and systems to become more proficient at their tasks over time, as well as evolve to learn new skills, should give this technology utility in virtually all industries around the globe. It's why the analysts at PwC are forecasting a $15.7 trillion addressable market for artificial intelligence by 2030. Though Nvidia has been the most front-and-center beneficiary of the rise of AI, it's actually been outshone by another AI stock recently: data-mining specialist Palantir Technologies (PLTR -0.42%). Shares of Palantir have soared 343% on a year-to-date basis and are up a scorching-hot 935% over the trailing-two-year period. In fact, Palantir has done so well that it's being added to the Nasdaq-100. However, Wall Street is a forward-looking entity. This means the million-dollar question is: "Can these monstrous gains can hold up in 2025 and beyond?" Based on what history tells us, this unabashed optimism may soon come to a screeching halt. If there's a prevailing catalyst that's most responsible for Palantir's enormous outperformance of Wall Street's major stock indexes over the last two years, it's the company's irreplaceability at scale. Though there are other businesses that tackle bits and pieces of what Palantir's platforms and services cover, there is no one-for-one replacement for what this company provides. Businesses with a secure moat tend to command a hearty valuation premium on Wall Street, and they typically enjoy predictable operating cash flow. Palantir's core operations are broken into two segments: Gotham and Foundry. The former is driven by AI and helps federal governments collect data, as well as plan and execute missions. Meanwhile, Foundry is the company's enterprise-focused segment that relies on AI and machine learning to help businesses make sense of their data. Palantir's Gotham platform has primarily been responsible for lifting the company to recurring profitability, based on generally accepted accounting principles (GAAP). Government contracts with the U.S. often span four or five years, resulting in transparent operating cash flow and steady double-digit sales growth. But there's also plenty of excitement for Foundry. This platform is still in its early stages of growth, with Palantir's commercial customer count surging 51% on a year-over-year basis in the latest quarter to 498. As businesses shift their data (and that of their customers) online and into the cloud, making sense of big data to streamline operations should become increasingly important. In short, the table is set for Foundry to deliver a superior growth rate to Gotham moving forward. Lastly, investors have to be impressed with Palantir's treasure chest. The company closed out the third quarter with $4.6 billion in cash, cash equivalents, and U.S. Treasuries, with no debt. This capital provides financial flexibility in any economic climate and may allow Palantir's board to reward shareholders via buybacks from time to time. While there's no denying that a lot has gone right for Palantir, it's also hard to ignore the historic precedent that it's contending with. During the mid-1990s, the internet began changing the corporate landscape and growth trajectory much in the same way we're witnessing artificial intelligence alter corporate growth strategies for businesses today. However, every next-big-thing technology and innovation that's followed in the internet's footsteps over the last three decades has endured an early innings bubble-bursting event. Investors have consistently overestimated the adoption and utility of game-changing technologies since the mid-1990s. Regardless of whether or not these trends went on to be successful over the long-term doesn't change the outcome that businesses leading next-big-thing trends have lost 80% to 99% of their value on a peak-to-trough basis. The silver lining for Palantir is that its multiyear contracts with the U.S. government and select allies may potentially soften the blow if an AI bubble took shape and eventually burst. But history bluntly suggests the decline expected in Palantir's stock would still be significant. To make matters worse, Palantir's valuation is at a level that's historically consistent with market leaders of next-big-thing trends reversing course. Prior to the dot-com bubble bursting, Amazon and Cisco Systems peaked in the neighborhood of 40 times trailing-12-month sales. We've also witnessed Nvidia recently hit a price-to-sales (P/S) ratio of more than 40. Palantir has them all beat, with a P/S ratio of more than 69 on a trailing-12-month basis. History clearly shows that market-leading businesses -- even those with sustainable moats -- haven't been able to maintain this much of a valuation premium for an extended period. Though it's not history-specific, the other issue for Palantir is that its most-profitable segment, Gotham, has a natural ceiling. As I've pointed out in the past, Gotham is only available to the U.S. government and its immediate allies. Palantir's management team isn't going to allow foreign governments, such as China or Russia, access to its AI-driven software-as-a-service (SaaS) solutions. This limits the long-term growth runway for Gotham and places the burden of future profit growth squarely on Foundry's shoulders. To reiterate, there's no question that Palantir deserves some level of valuation premium given its successful integration of AI, its push to recurring GAAP profits, and its irreplaceability. But with market leaders of next-big-thing innovations continually failing to live up to expectations in the early going, a halving in Palantir's stock, if not a larger percentage decline, would be par for the course, historically speaking.

Could This Artificial Intelligence (AI) Newcomer Be the Next Nvidia? | The Motley Fool

For much of the last two years, big tech has dominated the storyline revolving around artificial intelligence (AI). "Magnificent Seven" members Microsoft, Amazon, and Alphabet have invested billions into the likes of ChatGPT creator OpenAI and perhaps its biggest rival, Anthropic. Meanwhile there is Tesla, Elon Musk's brainchild that's looking to bring self-driving cars and humanoid robots to the masses. And of course, virtually none of the generative AI applications being developed by these megacap tech enterprises would even be possible without the help of Nvidia's graphics processing units (GPUs) and proprietary software. If you've read any of my prior pieces, you'll know that I tend to use Nov. 30, 2022 as my starting point for the AI revolution. To add some context, that is the day ChatGPT was released to the public. Since then, Nvidia has outperformed each of its Magnificent Seven peers by a long shot -- gaining over 700% as of market close on Dec. 12, 2024. To put it bluntly, this is Nvidia's world and everyone else is just living in it. Smart investors realize, however, that the performances of even the greatest behemoths can be matched. Outside of big tech, one company that has maintained star status in the AI realm is Palantir Technologies (PLTR -0.42%). Palantir has proven that it's capable of competing with larger incumbents in the world of enterprise software, and some investors such as billionaire entrepreneur Chamath Palihapitiya argue that the company hasn't even begun to scale yet. With so much potential on the horizon, is it possible that Palantir is the next Nvidia hiding in plain sight? Let's dig in and find out. During Palantir's third-quarter earnings call, CEO Alex Karp made an interesting statement regarding how data integration is the most important variable when developing AI-powered services. Karp proclaimed, "the experts that write about these things seem to believe the commodity, i.e., the LLM, is the valuable aspect of this and that the actual asset, meaning how you manage the commodity, is the actual value." What Karp is trying to say here is that large language models (LLMs) are more of a commodity than a proprietary technology. While Alphabet's Gemini, Amazon's Claude, Meta's Llama, and ChatGPT all offer unique features, the average user can't really tell the difference between these platforms. From Karp's purview, the real value proposition is how data is fed into LLMs through supporting software integrations. And that's where he believes Palantir has an edge. In April 2023, Palantir released its fourth major product called the Artificial Intelligence Platform (AIP). In the table below, I've included a number of key performance indicators that illustrate the impact that AIP is having on Palantir. Data source: Palantir investor relations. The advent of AIP has been transformative for Palantir. Growth in the company's customer roster is leading to accelerated revenue every quarter while profit margins have maintained a healthy level. The combination of revenue growth and strong margins provides Palantir with robust financial flexibility in the form of consistent free cash flow. By all accounts, Palantir looks unstoppable. Yet despite this impressive performance, there is further analysis to discuss before labeling the company as one with Nvidia-esque potential. When comparing a company to Nvidia, there's more to the equation than just valuation and share price. Nvidia's emergence as the biggest player in AI is not just due to its GPUs and compute networking business. It's actually how that business really works. Nvidia's hardware (i.e., GPUs) is tightly integrated with its Compute Unified Device Architecture (CUDA) software platform. The combination of Nvidia's GPUs layering on top of CUDA has basically created a "lock-in" effect with its customers -- essentially owning the AI stack within its customers' ecosystems. It's this dynamic that has helped Nvidia acquire an estimated 90% market share -- absolutely owning AI inferencing and training protocols. Furthermore, with more than $1 trillion of AI infrastructure spend projected over the next three years, Nvidia's tight grasp on the market puts it in position to continue acquiring incremental market share, making its upside even more lucrative. When it comes to enterprise software, I just can't say that Palantir has commensurate potential to that of Nvidia. In my eyes, GPUs and data centers are "must-have" items for generative AI development. By contrast, software and data analytics are more in the "nice-to-have" bucket. Despite its importance in data processing and making LLMs more useful, I question whether enterprise software is truly indispensable. Moreover, with intense competition from the likes of Snowflake, Databricks, and many more, I think Palantir may struggle to create a similar "lock-in" dynamic like Nvidia has managed to do. As much as I admire Palantir's management and am proud to hold the stock myself, I cannot say that the company will become the next Nvidia.

Can Palantir Stock Become the Next Nvidia? | The Motley Fool

With its stock up 2,500% in the past five years, it's perhaps not surprising that investors are looking for the next Nvidia (NVDA -2.25%). The company has been the biggest winner from the artificial intelligence (AI) boom and as a result has become one of the largest companies in the world. I was recently browsing a stock message board when I saw an investor ask which stock will be the next Nvidia. The overwhelming response was Palantir (PLTR 3.92%). The company has already had a strong 2024 and its stock has been among the biggest winners on Wall Street this year. With that said, let's dig into what it would take for Palantir stock to become the next Nvidia in the coming years. But first we'll have to decide what that actually means. Nvidia was trading at a split-adjusted price of about $5.30 around five years ago (Dec. 6, 2019) and trades at around $138 as of this writing, which is about a 26 times gain. The company has a market cap of about $3.5 trillion as of this writing. Palantir ended 2022 at $6.42 and was trading at roughly $72 on Dec. 11. From that perspective, the stock would have to rise to around $165 to be considered the next Nvidia from a percentage gain perspective, which is about another 130% increase. However, if we wanted to define the next Nvidia as being the next $3.4 trillion stock, Palantir shares would have have to soar 20 times. Since investors are most likely interested in finding a stock that will come close to Nvidia's returns over the next five years, we'll see if Palantir can become one of the world's largest companies in that time frame. Notably, Palantir's market cap is actually more today ($165 billion) than Nvidia's was at the end of 2019 ($144 billion). Palantir currently trades at what would be considered an astronomical valuation, with a forward price-to-sales (P/S) ratio of about 48 times next year's analyst estimates. This is for a company that grew its total revenue by 30% last quarter. That's not a justifiable valuation given that growth, so there are certainly some investors who see the possibility of Palantir's growth going parabolic in the years ahead. After minimal revenue growth in its fiscal 2023 ended in January, that's just what Nvidia was able to do -- experience parabolic revenue growth. For fiscal 2024, it grew its revenue by 123%, while through the first nine months of this year it increased revenue by 135%. Palantir will need to see similar growth and for a longer period of time, since while its market cap is starting from a higher valuation, its projected 2024 sales (around $2.8 billion) are much lower than Nvidia's 2019 sales ($10.9 billion). Palantir initially made its mark with the U.S. government, where its data gathering and pattern recognition software helped it become the most effective tool in fighting terrorism. It did this by being able to pull in data from a multitude of sources and make connections that might not be obvious. Later its technology was used by the Centers for Disease Control and Prevention to track the spread of COVID-19. Following a period of slowing growth, the company's growth accelerated this year with its new Artificial Intelligence Platform (AIP) gaining strong momentum in the commercial sector. Its number of U.S. commercial customers surged 77% year over year last quarter, while U.S. commercial revenue soared 54% to $179 million. The company credited its success in the U.S. commercial sector to "unrelenting AI demand." Meanwhile, the U.S. government has also been increasing its spending after a period of slowing growth. The company's U.S. government revenue growth decelerated to only 14% last year, down from 19% growth in 2022. However, its U.S. government revenue climbed 40% last quarter as every part of government was beginning to embrace the use of large language models (LLMs). However, Palantir does not think that creating the best LLM is the way to win the AI race. Instead, it thinks the key to AI moving forward is in the application and workflow layer, which is where its technology sits. It believes this starts with its ontology, which sits on top of the digital assets that are integrated into its platform, such as datasets and models, and then connects them to their real-world counterparts, which can be tangible assets like products or concepts like customer orders. As such, Palantir is able to use its AIP technology for a lot of different use cases across various industries. It is also able to quickly move from proof-of-concept to AI-powered software solutions that can work effectively in real-world environments through the use of rigorous testing and evaluation tools with its platform. It is this ability to get AI up and running in real-world environments without any negative impact from hallucinations (outputs that make no sense) and a lack of transparency that could help turn Palantir into the next Nvidia. Search results with some obvious gaffes is one thing, but if organizations are using AI solutions as a critical part of their businesses, they can't have AI making mistakes. This appears to be Palantir's secret ingredient. While Palantir's U.S. commercial revenue growth has been soaring, much of it is still with prototype work. One of the company's big opportunities is transitioning this into production. Palantir has already been seeing solid growth within its existing customer base, with a net dollar retention rate of 118% last quarter. This metric reveals how much revenue came from existing customers that have been with the company for more than a year after customer churn. However, it doesn't include newer customers recently added that have already been starting to expand. Adding new customers and moving them into production is what will give the company the possibility of seeing its revenue growth go parabolic. If it has the superior application and workflow layer, it could be the ultimate AI winner on the software side, much like Nvidia has been the winner on the hardware side. That said, much of this is already priced into the stock, which at current levels does make it a pretty speculative investment. To reach the heights of Nvidia, the company would have to double revenue each year for the next five years while keeping a 40 P/S multiple. That won't be easy.

Palantir Stock Investors Just Got Great News From the Wall Street Analyst That Predicted the Nasdaq's Rise to 20,000 | The Motley Fool

Dan Ives is the global head of technology research at Wedbush Securities. During his two decades following the tech sector, Ives has made several big, bullish calls that challenged the prevailing sentiment on Wall Street. For instance, he predicted in January 2024 the Nasdaq Composite would hit 20,000 this year. Lo and behold, the index crossed that threshold last week. But Ives made what may be his boldest call to date last month during an interview with Schwab Network. He argued Wall Street is dramatically underestimating how much Palantir Technologies (PLTR 3.92%) will benefit from enterprise artificial intelligence spending. Ives believes Palantir could eventually achieve a market value of $1 trillion. The implies about 490% upside from its current market value of $170 billion. Here's what investors should know about Palantir. Palantir started developing data analytics software for the U.S. intelligence community about two decades ago, and later expanded into the commercial sector. Its core products, Gotham and Foundry, serve as central operating systems that connect complex information to an ontology (a digital representation of real-world objects) to facilitate analysis and improve decision-making. However, it was the 2023 introduction of its artificial intelligence (AI) platform, AIP, that truly transformed the company. AIP integrates large language models into Gotham and Foundry, which enables customers to apply generative AI to their operations. Dan Ives has called AIP a "launching pad of AI use cases," and other analysts have praised the product as well. Notably, Forrester Research earlier this year ranked AIP as the best artificial intelligence and machine learning platform on the market, awarding it higher scores than similar tools from Microsoft and Alphabet. Similarly, Dresner Advisory Services ranked Palantir as one of two top vendors in its 2024 market study of artificial intelligence, data science, and machine learning software. However, not all analysts are so impressed. Gartner scored Palantir below a dozen other vendors for data integration capabilities, and did not even recognized Palantir in its latest report on data science and machine learning. Mixed opinions concerning the company are also reflected in the target prices set by Wall Street analysts, which range from $11 per share to $75 per share. Palantir reported encouraging financial results in the third quarter. The company increased its customer count 39% to 629, and the average existing customer spent 18% more. In turn, revenue rose 30% to $726 million, the fifth straight acceleration in sales growth, and non-GAAP net income increased 42% to $0.10 per diluted share. Management attributed the strong numbers to unrelenting demand for AIP. Additional highlights from the third quarter are listed below: Additionally, Palantir has made a few important announcements since the quarter ended. It won a $37 million contract establishing it as the lead software integrator for U.S. Special Operations Command. Palantir also received FedRAMP High Authorization, meaning its full product offering can be used by the U.S. government to process sensitive unclassified workloads. That could lead to more robust growth in the government segment. In summary, Palantir is executing well across its commercial and government segments, due in large part to demand for AIP. That certainly makes the business compelling, but the stock is another story. Wall Street expects Palantir's adjusted earnings to increase at 25% annually through 2027. That consensus makes the current valuation of 215 times adjusted earnings look absurd. I'm not sure what Ives would say about that. On one hand, he sees a path to a trillion-dollar market value for Palantir. On the other hand, his 12-month price target of $75 per share implies 1% downside. On that note, Ives has the highest target on Wall Street, which means literally every analyst following Palantir expects the stock to decline in the next 12 months. Admittedly, some analysts may raise their forecasts given that Palantir will be added to the Nasdaq-100. Here is the big picture: Ives has made countless good calls during his career, and I would not bet against him. My advice to investors that (like me) feel uncomfortable buying Palantir at its current price: Keep Palantir on your watchlist, and look for opportunities to buy the stock on dips. If Ives is correct in thinking Palantir could be a trillion-dollar company (or even a $500 billion company), there is still plenty of time to build a position. Don't let fear of missing out muddle the decision-making process.

Prediction: This Under-The-Radar Opportunity Will Be the Most Important Part of Palantir's Business in 2025 | The Motley Fool

However, smaller players have emerged and given big tech a run for its money. Data-analytics specialist Palantir Technologies (PLTR 3.92%) might just be the newcomer that will actually hold its own over the long run as it competes with larger companies. As of this writing, Palantir is the top-performing stock in the S&P 500 for 2024. Much of these gains stem from investor enthusiasm around Palantir's newest software suite -- the Artificial Intelligence Platform (AIP). However, despite AIP's rapid adoption over the last year, many investors focus on its use cases in the private sector. But below, I'll explore a lesser-known opportunity that Palantir is quietly dominating, one that will likely be the company's biggest catalyst in 2025. For the last two years, investors have been told ad nauseum how AI will lead to higher productivity levels in the workplace and be the impetus for game-changing technologies, such as humanoid robotics or self-driving cars. But one area that consistently gets overlooked is how AI is playing a role in the defense sector -- specifically, in military operations. Analysis from Mordor Intelligence suggests AI applications in the military include data analytics and robotics automation, which combine for a total addressable market size of over $60 billion. Below, I'll detail some of Palantir's major wins so far in this space. What I find encouraging about Palantir's public sector operation is that the company works with both government agencies and partners with other technology companies looking to get involved with defense operations. Earlier this year, Palantir and Microsoft joined forces for a campaign that integrates AIP into Microsoft's Azure cloud infrastructure, specifically in secured environments across the Department of Defense (DOD). More recently, Palantir forged another alliance with a major cloud provider, Amazon Web Services (AWS). The partnership represents another use case for Amazon's large language model (LLM) Claude and how it can now integrate with AIP across defense agencies. Lastly, Palantir recently partnered with Meta. Similar to the deals with Microsoft and Amazon, Meta will be leveraging Palantir's capabilities across its LLM (called Llama) as the company looks to make a splash across the public sector in its own right. Outside of partnering with big tech, Palantir has also secured a number of lucrative federal contracts over the last few months. Some notable examples include a multiyear deal worth up to $100 million as part of Palantir's Maven contract, as well as a deal worth nearly $1 billion with the Naval Information Warfare Center (NIWC). On top of the deals won directly from the government, Palantir has also struck partnerships with interesting players outside of big tech. For example, the company just announced an alliance with Anduril -- a start-up that develops autonomous systems, such as underwater drones. In addition, the company also partnered with government consulting leader Booz Allen Hamilton. While Palantir has long enjoyed a foothold in the public sector (and specifically with U.S. government agencies), the many deals and partnerships it has signed recently highlight the company's continued momentum. They also signal that the government is increasing its investment in AI with Palantir being a consistent beneficiary of such work. The company's U.S. government business could show significant acceleration trends next year as its various partnerships and contracts bear fruit.

Meet the Best-Performing S&P 500 Stock This Year. It's New to the Index, and You Won't Believe What Wall Street Expects From It in 2025.

The S&P 500 (^GSPC -0.00%) soared from the very start of the year, confirming its presence in a bull market and going on to reach record high after record high. And today, the benchmark continues this momentum, now heading for an annual gain of more than 27%. That follows last year's 24% increase, marking two fantastic years for investors. Technology companies have contributed significantly to the movement, as investors poured into those winning in the area of artificial intelligence (AI). With AI's promise to revolutionize many industries, investors have been eager to get into the space early -- and maximize their gains. And it just so happens that this year's best-performing S&P 500 company is one that launched a major AI-powered platform just a year ago. Though this company has been around for about 20 years, its growth has truly taken off in recent times, with earnings reaching records. This player has done so well that the S&P 500 invited it to join this year, and it entered in September. Let's meet this company that's heading for a 300% increase this year -- and discover Wall Street's surprising expectations for this player in 2025. Using data for game-changing decisions This particular company isn't a developer of the parts needed to make AI function -- such as chips or servers. Instead, it uses AI to fuel an incredibly powerful platform that's been known for serving governments for years. This company's software helps customers aggregate all of their data -- which may be quite dispersed and seem unrelated -- and use it to make potentially game-changing decisions. From governments to hospitals, airlines, and restaurant chains, customers are rushing to sign on for this system that could help them save time and money and excel across a variety of projects. The top-performing AI company behind this technology is Palantir Technologies (PLTR 3.92%), and demand from both government and commercial customers has driven double-digit revenue growth in recent quarters. What's particularly exciting is Palantir's growth in commercial customers -- from 14 U.S. commercial customers four years ago, Palantir has progressed to about 300 today. And this may be just the beginning as companies aim to harness AI to become more efficient and accelerate growth. Deal value is looking positive too, with Palantir signing more than 100 deals worth more than $1 million. And to keep this growth going, Palantir came up with a genius idea: It introduces potential customers to its Artificial Intelligence Platform (AIP) through AIP boot camps. These sessions help them go from zero to a potential use case in a matter of hours -- so they immediately can see how AIP will impact their businesses. Palantir has said these boot camps have driven sales growth, and in the recent quarter, the company spoke of how they converted into new deals -- in fact, many customers' boot camps translated into seven-figure deals in less than two months. What Wall Street says will happen next So, it's no surprise that Palantir stock has taken off this year. But according to Wall Street, the stock might have gone too far, too fast. The average analyst estimate calls for a more than 40% decline from this level over the coming 12 months. The stock has become expensive, trading for a mind-blowing 185x forward earnings estimates. All of this means that, even though Palantir is growing in leaps and bounds, Wall Street expects a drop in the stock price in 2025. Does this mean you should avoid Palantir? Not necessarily. Yes, the stock looks expensive according to its forward price-to-earnings ratio. But it's important to note that this measure generally takes into account expected earnings in the coming year -- and doesn't consider what Palantir's earnings picture may look like five or 10 years down the road. I still don't see Palantir as the best stock for everyone today -- for example, a value investor should look elsewhere. But long-term investors interested in growth companies that are in the early stages of their growth stories should take a second look at this top S&P 500 performer, in spite of its hefty valuation. Over time, investors still could win by investing in Palantir, thanks to the unstoppable momentum of its commercial business and the company's AI-driven platform.

Better Artificial Intelligence Stock: Palantir vs. Nvidia | The Motley Fool

Shares of both Palantir Technologies (PLTR 2.29%) and Nvidia (NVDA 3.14%) have delivered stunning gains this year thanks to the growing demand for both artificial intelligence (AI) hardware and software, though it is worth noting that one of these stocks has outperformed the other one by quite some distance. Palantir stock's gains of 345% (as of this writing) are significantly higher than the 188% jump that Nvidia has recorded this year. However, does this make Palantir the better AI stock to buy of the two? Let's find out. Nvidia may have made its name as the go-to provider of chips for companies looking to train AI models, but Palantir is the one that's helping enterprises and governments bring those models into production. More importantly, the rapidly growing adoption of Palantir's Artificial Intelligence Platform (AIP), which allows businesses to integrate large language models (LLMs) and generative AI into their operations, has led to a sharp acceleration in the company's business and revenue pipeline. Its revenue in the third quarter of 2024 was up 30% from the same period last year to $726 million. For comparison, Palantir's top line increased at a much slower pace of 17% in 2023. The company's growth has accelerated as the year has progressed, with Palantir management pointing out on the November earnings conference call that it "continues to see AIP-driven momentum both in expansions and new customer acquisitions." As it turns out, Palantir's customer count swelled by a solid 39% year over year. Deal size also increased as the number of transactions worth at least $1 million increased by 30% year over year last quarter to 104. The company isn't attracting just new customers for its AI software platform; it is also winning more business from existing customers. This is evident from Palantir's net-dollar retention rate of 118% in Q3, a metric that compares Palantir's trailing-12-month revenue at the end of a quarter to the trailing-12-month revenue from the same customer cohort in the year-ago period. The company's net dollar retention in the same quarter last year stood at 107%, suggesting that existing customers have increased their adoption of its platform. Also, Palantir has a robust revenue pipeline that should allow it to sustain its impressive growth in the future as well. This is evident from the company's remaining deal value (RDV) worth $4.5 billion, a metric that jumped 22% year over year in the previous quarter. The impressive growth in this metric bodes well for Palantir as RDV is the total remaining value of the company's contracts at the end of a period. The above discussion tells us why Palantir has increased its full-year guidance, expecting just over $2.8 billion in revenue in 2024. That would be a 25% increase over 2023's revenue of $2.23 billion. The estimates for the next two years have also been increased. As the chart above shows, Palantir's top line is expected to increase at 20%-plus rates over the next couple of years. However, don't be surprised to see the company clocking stronger growth thanks to the massive opportunity in the AI software platforms market, a space that's set to grow at an annual rate of close to 41% through 2028. Palantir, therefore, has the potential to remain a top AI stock for a long time to come. Nvidia stock's returns this year pale in comparison to what Palantir has clocked, but investors shouldn't forget the critical role that the company is playing in the proliferation of AI. The chipmaker reportedly controls more than 85% of the market for AI data center graphics processing units (GPUs), which explains why it has been clocking outstanding growth quarter after quarter. What's worth noting is that Nvidia's dominance of the AI GPU market is so strong that rivals have been finding it difficult to make a dent in the company's business. The company has reportedly sold out the entire capacity of its new Blackwell graphics cards for the next year, though the good part is that it is taking steps to ensure that it can increase supply. Not surprisingly, Nvidia is expected to deliver another terrific year of growth in fiscal 2026 following a stellar show so far this year. Its revenue is expected to increase by 112% in fiscal 2025 to $129 billion, and the forecast for the next couple of years is quite robust as well. Even better, Nvidia remains a top growth stock to buy for the long run even after the remarkable gains that it has clocked in the past couple of years. Catalysts such as the booming demand for AI chips and enterprise software, the transition to accelerated computing, the adoption of digital twins, and growing chip content in cars are the reasons why Nvidia may be sitting on a total addressable market worth a whopping $1.7 trillion. It is also worth noting that Nvidia may become a threat to Palantir in the enterprise AI software space. CFO Colette Kress remarked on the company's latest earnings conference call: We expect Nvidia AI Enterprise full-year revenue to increase over 2x from last year, and our pipeline continues to build. Overall, our software, service, and support revenue is annualizing at $1.5 billion, and we expect to exit this year annualizing at over $2 billion. As such, Nvidia looks like a more complete AI stock as compared to Palantir. However, that's not the only reason why it looks like the better AI pick of the two. We have already seen that Nvidia is growing at a faster pace than Palantir. More importantly, Nvidia is expected to grow at a faster pace than Palantir in the next year despite being a much larger company. All this makes buying Nvidia stock over Palantir a no-brainer, especially after looking at the following chart. Nvidia is significantly cheaper than Palantir despite enjoying superior growth. In fact, Palantir's valuation is so rich that the stock's 12-month median price target of $38 points toward a 50% drop from current levels. Nvidia, on the other hand, carries a 12-month median price target of $175, which would be a 23% increase from where it is now. Moreover, Nvidia looks like the better AI stock to buy even for the long run considering that it addresses a much bigger addressable market thanks to its growing presence in AI software and dominance in hardware.

Missed Out on Palantir? 1 No-Brainer Artificial Intelligence (AI) Stock to Buy Before It Soars in 2025

Palantir Technologies (PLTR 3.92%) has been one of the hottest stocks on the market in 2024, logging amazing gains of 319% as of this writing. The company's artificial intelligence (AI) software platform has been in terrific demand from customers and governments looking to integrate generative AI into their data analysis. Palantir's revenue growth accelerated in recent quarters, and its sizable revenue pipeline suggests that it could maintain that momentum in 2025 as well. However, there is one problem with Palantir stock right now -- its valuation. The stock trades at a whopping 67 times sales and 372 times trailing earnings. This makes it clear that Palantir is no value stock. More importantly, the AI software specialist will have to continue exceeding Wall Street's expectations quarter after quarter to maintain its red-hot stock market rally. Palantir's valuation is now so expensive that the stock's median 12-month price target of $38, as per 20 analysts, points toward a 48% downside from current levels. The good news for investors looking to capitalize on the booming generative AI software market is that there is a much cheaper alternative to Palantir that they can consider buying right away. C3.ai taps into the fast-growing enterprise AI software market C3.ai (AI 3.16%) stock's returns this year are nowhere near Palantir's, but that's good news for investors as it can be bought at a much cheaper valuation. But more importantly, C3.ai's growth in the second quarter of fiscal 2025 (which ended on Oct. 31) shows that it can match Palantir's financial growth. C3.ai released its latest quarterly results on Dec. 9. The company's revenue increased an impressive 29% year over year to $94.3 million, which was well above the consensus estimate of $91 million. Additionally, C3.ai's bottom-line loss shrank to $0.06 per share from $0.13 per share in the year-ago period. Analysts were expecting a bigger loss of $0.16 per share. The important thing worth noting here is that C3.ai's growth has been improving at an impressive pace in recent quarters. For example, the company reported a 17% year-over-year increase in revenue in the year-ago quarter, while its top line was up 21% year over year in the first quarter of fiscal 2025. This acceleration in C3.ai's growth can be attributed to an increase in the number of customer agreements that the company is signing. More specifically, C3.ai struck 58 customer agreements last quarter, which was almost in line with the 62 agreements it struck in the same period last year. However, C3.ai managed to win more business from existing customers. As pointed out by CEO Tom Siebel on the latest earnings conference call, the company has entered new and expanded agreements with ExxonMobil, Coke, Dow, Holcim, Shell, Duke Energy, Boston Scientific, Rolls-Royce, Cameco, Mars, ESAB, and Flex and Worley, among others. C3.ai's AI software offerings are gaining traction among federal customers as well. The company has entered into new and expanded agreements with the U.S. Department of Defense, U.S. Air Force, U.S. Navy, U.S. Army, U.S. Marine Corps, the Defense Logistics Agency, and the Chief Digital Artificial Intelligence Office, among others. C3.ai was also engaged in 36 pilot projects last quarter. So there is a good chance that it could win more contracts going forward and keep growing at a healthy pace. The company has also raised its fiscal 2025 guidance and now expects to end the year with $388 million in revenue at the midpoint, up from the earlier midpoint of $382.5 million. The updated revenue guidance means that the company is on track to finish the current fiscal year with revenue growth of 25%, though that figure can move higher if it can convert more of its pilots into actual customers. For comparison, C3.ai's top line increased by 16% in the previous fiscal year. More importantly, analysts have significantly raised their revenue expectations from the company for next year as well. We have already seen how expensive Palantir stock is right now at 67 times sales. C3.ai, for comparison, is trading at a much lower price-to-sales ratio of 15. Another thing worth noting is that Palantir's revenue in the previous quarter increased by 30% year over year. So C3.ai isn't lagging far behind in its pace of growth. Moreover, C3.ai's full-year revenue growth forecast is in line with the growth that Palantir is expected to deliver in 2024. Of course, Palantir is a much bigger company, but investors will have to pay a significantly richer valuation if they want to buy it. So investors who missed out on Palantir's remarkable surge this year can still consider buying C3.ai. The stock could deliver healthy gains -- assuming C3.ai generates $465 million in revenue next fiscal year (as we saw in the chart earlier) and the market decides to reward it with a higher sales multiple thanks to its improving growth profile and the premium that its fellow AI software specialist is commanding. Assuming C3.ai is trading at even 20 times sales at the end of the next fiscal year, its market cap could hit $9.3 billion based on the revenue estimate discussed above. That would be a 94% jump from current levels. Even a sales multiple of 15 would translate to a $7 billion market cap, which would be a 46% increase from current levels. Investors looking to add an AI stock to their portfolios that's significantly cheaper than Palantir but is matching its growth can definitely take a closer look at C3.ai as it seems poised for a solid 2025.

Palantir vs. Nvidia: Which Stock Will Outperform in 2025?

Two of the top-performing tech stocks of 2024 were Palantir (PLTR 0.95%) and Nvidia (NVDA -1.41%). In terms of stock performance, Palantir was the clear winner in 2024, with its stock up about 325% as of this writing, compared to about a 180% gain for Nvidia. Those are both incredible returns. The question, though, is which stock is most likely to outperform the other in 2025. Let's look at a couple of criteria to help decide. Nvidia already has a wide moat Companies with wide moats are generally considered desirable. In simplest terms, moat is the advantages a company has over its competitors that allow it to keep its competitive edge and maintain market share. Nvidia is the biggest winner in the artificial intelligence (AI) infrastructure space due to the wide moat it created around its business through its CUDA software platform. The platform came about as a way for the company to expand the use of its graphic processing units (GPUs) beyond speeding up the rendering of graphics in things like video games, for which the chips were initially designed. The CUDA platform allowed its chips to be programmed to better handle other tasks, which led to more developers learning the program to the point where it became the de facto platform on which they were taught to program GPUs. This led to the wide moat the company sees today and why it has nearly a 90% market share in the GPU space. Palantir's moat isn't quite as clear cut, largely because the AI software space in which it is involved is still developing. However, its AI platform (AIP) has been gaining huge traction in the commercial space, and growth has started to reaccelerate in the government space. The company, meanwhile, established itself as an important part of mission-critical tasks for the government, with its technology being used for such things as fighting terrorism and tracking COVID-19 cases during the pandemic. While many large tech companies are battling to create the best AI models, Palantir thinks AI models will become commoditized and that the real differentiation will be within the application and workflow layer on which it is focused. It believes its analytics and pattern recognition expertise will allow it to rigorously test AI applications and quickly move them from proof-of-concept to AI-powered software solutions. It believes that this is its moat. So far, this appears to be playing out, but more time is needed for it to be conclusive. Both are seeing strong growth Nvidia has seen explosive revenue growth this year, which is even more incredible given the large revenue base from which it started. Through the first nine months of the year, the chipmaker was able to grow its revenue by an astounding 135% to $91.2 billion. For its fiscal third quarter of 2025, revenue soared 94% to $35.1 billion. Meanwhile, it carries robust margins of around 75% to boot. The company is continuing to see insatiable demand for its chips, with demand continuing to outpace supply for its newest GPU architecture. Growth is expected to remain strong in the years ahead as major tech companies continue to race to create more sophisticated AI models. These models need exponentially more computing power to be trained, with newer models, in many cases, using 10 times as many GPUs to be trained on than their prior versions. Looking ahead, analysts are expecting Nvidia to grow its revenue by more than 50% in 2025 to $195.4 billion. Palantir has not been growing nearly as briskly as Nvidia, but it has been seeing its revenue growth accelerate throughout the year. The company had 21% revenue growth in the first quarter from a year ago, and accelerated to 27% in Q2 and 30% in Q3 to $726 million. Parts of its business, though, are growing much quicker, with U.S. commercial revenue soaring 54% last quarter and U.S. government revenue climbing 40%. International markets, however, have been lagging. With customers growing strongly, including by 39% last quarter, and the company having a big revenue opportunity moving customers from prototype work to full production, Palantir has the potential to see revenue growth continue to accelerate. However, that is not currently baked into analyst estimates, which are projecting about 24% revenue growth in 2025 to $3.47 billion. Valuation shows a clear winner From a valuation perspective, Nvidia is the clear winner by a wide margin. It trades at an attractive valuation, with a forward price-to-earnings (P/E) ratio of just over 31 based on 2025 analyst estimates and a price/earnings-to-growth (PEG) ratio of approximately 1. A PEG ratio under 1 is generally viewed as undervalued, while growth stocks will quite often have PEG ratios well above 1. Palantir, meanwhile, trades at a forward price-to-sales (P/S) ratio of about 47.5 times next year's analyst estimates. That's a high valuation for a company with 30% revenue growth and is more than double peak historic SaaS (software-as-a-service) multiples. Nvidia is the clear winner on paper, with stronger revenue growth, a well-established moat, and a much more attractive valuation, which is why I prefer it heading into 2025. If analyst projections are in the general ballpark for both stocks, it should outperform. That said, it is the unexpected that could determine a different outcome. If Palantir can prove its AI platform is the best and becomes widely adopted, sending revenue growth soaring, it could once again outperform. Meanwhile, if AI infrastructure spending unexpectedly falls, Nvidia could underperform. I'm sticking with Nvidia, but these are scenarios to watch out for in 2025.

Why Nvidia Is the Hands-Down Better Stock to Buy Than Palantir for 2025 | The Motley Fool

There's no question which artificial intelligence (AI) stock is set to be the biggest winner of 2024. Despite being on track to deliver a gain of more than 180%, it won't be Nvidia (NVDA 3.14%). Instead, Palantir Technologies (PLTR 2.29%) is poised to take the AI crown with its shares skyrocketing more than 330% this year. But is Palantir the better pick going forward? I don't think so. Here's why Nvidia is the hands-down better stock to buy than Palantir for 2025. Palantir's growth story is a very good one. In the company's third-quarter update, CEO Alexander Karp bragged, "We absolutely eviscerated this quarter, driven by unrelenting AI demand that won't slow down." The AI demand Karp referenced helped Palantir's revenue jump 30% year over year. Adjusted earnings per share soared 43%. Karp wrote to shareholders in November, "This is still only the beginning." He noted that Palantir's growth "is accelerating." The election of Donald Trump to a second term in the White House has investors excited about the opportunities for the company, which counts the U.S. government as its biggest customer. What about Nvidia? The GPU maker reported year-over-year revenue growth of 94%, more than three times higher than Palantir's. Nvidia's adjusted earnings per share skyrocketed 103% year over year. Importantly, those numbers didn't reflect one penny in sales from GPUs based on Nvidia's new Blackwell architecture. CEO Jensen Huang believes Blackwell could become his company's most successful product yet. He even thinks it could be the most successful product ever for the entire computing industry. And Nvidia has more new products on the way each year after Blackwell. I'd argue that Palantir and Nvidia are in different leagues when it comes to growth. Is it possible for a stock to be a better pick than another even if its growth prospects aren't as good? Yes, if the first stock is more attractively valued based on its growth prospects than the second stock. But this isn't the case for Palantir versus Nvidia. Palantir's shares trade at 161 times forward earnings. The stock's price-to-earnings-to-growth (PEG) ratio based on five-year earnings growth projections is 3.34, according to financial markets infrastructure and data provider LSEG. Those valuation metrics make Nvidia seem dirt cheap by comparison. Nvidia's forward earnings multiple is 33.4. Its PEG ratio is 0.89. There's simply no contest on valuation between these two stocks: Nvidia is the clear winner. I'm not the only one who views Nvidia as the clearly better stock to buy than Palantir. Wall Street likes Nvidia more, too. Of the 19 analysts surveyed by LSEG in December who cover Palantir, only four rated the stock as a "buy" or a "strong buy." Eight analysts recommended holding Palantir. Seven analysts rated the stock as an "underperform" or "sell." Contrast that bleak picture with Nvidia's. Of the 63 analysts surveyed by LSEG in December who cover the chipmaker, a whopping 59 of them rated the stock as a "buy" or a "strong buy." The remaining analysts recommended holding Nvidia. None thought selling the stock was a good idea. Nvidia also thrashes Palantir on 12-month price targets. The consensus price target for Nvidia reflects an upside potential of 24%. Meanwhile, the average analysts' price target for Palantir is roughly 47% lower than its current share price. It's not hard to figure out why Wall Street has such a higher opinion of Nvidia than Palantir. When one stock has stronger growth prospects and a more attractive valuation than another stock, it's going to be the hands-down better pick every single time.

AI Showdown Between Nvidia, Palantir: Which Stock's Dreams Shine Brighter? - NVIDIA (NASDAQ:NVDA), Palantir Technologies (NASDAQ:PLTR)

Palantir's bullish momentum drives a 308.95% yearly gain, though analysts warn of a 14.63% downside. The battle for AI supremacy isn't just about innovation -- it's a clash of titans in the stock market. Nvidia Corp NVDA and Palantir Technologies Inc PLTR are two names synonymous with AI dominance, but which one deserves a spot in your portfolio? Let's break down the numbers and signals analysts are sending. Nvidia: The AI Powerhouse Nvidia, with its cutting-edge GPUs, has been riding high on the AI revolution, posting an 184.01% gain in the past year. But the recent months have been bumpy, with a 6.62% decline in the last 30 days, signaling headwinds for the tech giant. Analysts from DA Davidson, Phillip Securities and Truist Securities, as an average of all three, peg Nvidia's price target at $154.67, an implied 12.44% upside from the current price of $137.34. Chart created using Benzinga Pro But technical indicators suggest trouble: Eight-day SMA at $139.81: A bearish signal. 20-day SMA at $140.38: Another bearish signal 50-day SMA at $138.57: Yet another bearish. 200-day SMA at $115.28: A bullish signal, indicating long-term optimism. Despite the bearish near-term trend, Nvidia's fundamentals keep it in the game, especially for long-term AI believers. Read Also: Palantir Positioned To Become 'The Next' Oracle In 2025, Says Dan Ives: 'Messi Of AI' Set For Breakout Year Palantir: The AI Growth Rocket Palantir, an analytics giant with a focus on AI-driven data solutions, has been on a jaw-dropping rally, boasting a 308.95% gain in the past year and a 20.40% surge in the past month. Chart created using Benzinga Pro Unlike Nvidia, Palantir's current trend is strongly bullish, backed by robust technicals: Eight-day SMA at $72.51: A bullish signal. 20-day SMA at $67.94: A bullish signal. 50-day SMA at $55.16: Another bullish signal. 200-day SMA at $33.73: Yet another bullish signal, underscoring sustained momentum. Analysts, however, have mixed feelings. Mizuho, Baird and BofA Securities give Palantir, as an average of all three, a price target of $63, implying a 14.63% downside from its current price of $73.20. This disparity suggests Palantir might be overextended in the short term, even if the technicals scream bullish. Verdict: Growth Vs. Stability If you're looking for momentum and near-term gains, Palantir might be your pick, riding its bullish wave. But if long-term AI dominance is your goal, Nvidia's fundamentals and analyst support make it a compelling choice, despite the current bearish signals. Investors must decide: ride Palantir's rocket or bet on Nvidia's resilience? Read Next: 2025 Investment Themes: AI, Energy, Defense Redefine US Markets Photos: Shutterstock NVDANVIDIA Corp$133.38-2.89%Overview Rating:Good75%Technicals Analysis1000100Financials Analysis600100WatchlistOverviewPLTRPalantir Technologies Inc$74.011.11%Market News and Data brought to you by Benzinga APIs

Best Artificial Intelligence (AI) Stock: Palantir Stock vs. AMD Stock

Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Palantir Technologies. The Motley Fool has a disclosure policy. Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.