Palantir's Stock Soars Amid AI Boom: Analyzing the Surge and Future Prospects

Palantir Jumped Today -- Is the Red-Hot Artificial Intelligence (AI) Stock Still a Buy? | The Motley Fool

Palantir (PLTR 4.58%) stock posted another day of gains in Tuesday's trading. The software company's share price closed out the daily session up 4.6% and had been up as much as 4.9% earlier in trading. Palantir's valuation continued to climb today following news that Republican Rep. Marjorie Taylor Greene had purchased new shares in the company recently. As a member of Congress, Greene is required to disclose her stock purchases and sales. Earlier this month, she purchased new Palantir stock worth between $1,000 and $15,000 and also purchased shares in other companies including Intel, Microsoft, and Meta Platforms. Palantir has been on an incredible run. The company's share price is now up 410% over the last year. On the heels of that incredible rally, the company's market capitalization has been pushed up to approximately $284 billion. Palantir is now valued at approximately 225.5 times this year's expected earnings and 75 times expected sales. That's a risky, growth-dependent valuation even for a company with a leading position in artificial intelligence (AI) software. Some very strong growth is already priced into the stock at current levels, and it wouldn't be surprising to see the company's share price take a substantial hit in conjunction with even modest unfavorable news. On the other hand, I think that long-term investors who buy Palantir stock at today's prices will likely still see strong returns. The business is posting fantastic profit margins and has proven to be highly scalable, and it still has a long runway for continued expansion. With its category-leading product offerings for both private-sector and government customers, the company appears uniquely well positioned to benefit from the adoption and ongoing evolution of artificial intelligence. The company's strong presence in the defense industry should also give it some valuation protection in the face of rising geopolitical tensions. So while I think investors should build a position in Palantir through a dollar-cost-averaging strategy rather than all at once, I think shares are still worthwhile for long-term investors at current prices.

Palantir Stock Is Up Nearly 50% to Start 2025. Can This Unstoppable AI Stock Keep It Up? | The Motley Fool

Few stocks have had the run that Palantir (PLTR 1.06%) has had over the past year or so. Since the beginning of 2024, Palantir's stock has risen around 550%. In 2025 alone, Palantir is up nearly 50%, boosted by a strong Q4 result that sent shares skyrocketing after the report was released. That's an incredible performance, and investors want to know if they're too late to buy the stock. Let's see if there's still more fuel left in this rocket ship. While Palantir's stock is well known, what they actually do is a bit more perplexing. In simple terms, Palantir's business is all about one thing: Data. Its platforms help its clients make important decisions by taking in all of the data a company has access to, processing it, and then giving its users real-time insights into the best decision possible. It uses artificial intelligence (AI) to process a lot of this data, making it a trendy investment as well. Palantir started by marketing this software to governments worldwide. Eventually, the use of its software spread to the commercial market as well. This one-two punch of commercial and government clients has given Palantir a massive audience to market to, and it has positioned itself well with its latest product: Artificial Intelligence Platform (AIP). AIP allows its users to integrate AI into the inner workings of a business rather than use it as a tool on the side. It also allows the creation of AI agents that can do work that humans used to do. Palantir's management stated that AIP continues to be the driving force behind new customer acquisition and has helped propel its stock to new heights. Palantir's financials have also improved over its massive run-up. In Q4, Palantir's revenue grew 36% year over year to $828 million. This blew away management's guidance for Q4, as they only projected $767 million in revenue. Unlike some AI companies, it's also profitable, although its profit margin slipped significantly in Q4 thanks to rapidly rising operating expenses. Still, Palantir is a growth machine, and management projects that Q1 revenue will be about $860 million, indicating 36% growth. Palantir's management has a history of under guiding, so investors can likely expect a higher revenue growth rate than that. For 2025, management expects $3.75 billion in revenue, or about 31% growth. Those are impressive figures, and it's no wonder the stock went soaring after reporting blowout Q4 earnings. However, investors must understand a key point about Palantir's stock, and it could be the thing that sinks the ship. The market isn't blind to Palantir's success, and the stock has been bid up. While we could examine its price-to-earnings (P/E) ratio since it is profitable, that's not a great assessment of the stock because it hasn't reached peak profitability. Instead, let's value the stock based on its potential. While Palantir's business reached 20% profit margins in a few quarters during 2024, the best software companies have a profit margin of around 30%. So we'll use that as its long-term target. Furthermore, let's assume that Palantir's 36% growth rate will accelerate to 40%. Additionally, let's say it can grow at that pace of 40% for five years. Those are extremely bullish predictions, but if they come true, Palantir's stock will still be incredibly expensive. If those projections come true, Palantir will produce over $15 billion in revenue and $4.6 billion in profits. However, with the company already valued at $250 billion, it would trade at 55 times projected 2025 earnings. Bear in mind that those projections only come true if the stock price doesn't rise from today's levels. There's a lot of growth baked into the stock price, and there's a lot of improbability baked into those assumptions as well. Sustained 40% revenue growth over a five-year period is incredibly rare, but that's basically what the stock price assumes. One of the hottest AI stocks on the market, Nvidia, trades for 51 times trailing earnings and is still growing its revenue faster than Palantir. The market has bid up Palantir's stock to unreasonable levels, and investors need to take note of that. Palantir could have an incredibly successful five years as a business, but the stock would still be expensive by the end of the run. As a result, I think investors need to take some profits, as this stock could come crashing down to earth any day. Or, it could continue rising in the AI-induced investing mania. It's hard to tell what will happen or when, but Palantir's stock is overvalued, and investors need to stay aware of that.

Palantir is on fire: Up 50% in 2025 and aiming for the Moon, can it go higher? Here's what's next for investors?

Palantir Technologies has been one of the hottest stocks in the market, going up almost 550% since early 2024, according to reports. The stock alone has risen about 50% since 2025, driven by robust Q4 results that drove shares higher. But with such phenomenal performance, most investors are asking themselves -- has Palantir reached its pinnacle yet, or is there still more growth to go? Palantir is about only one thing: data. Its software platforms assist companies in processing and analyzing large quantities of data and provide real-time intelligence for enhanced decision-making. Palantir relies on artificial intelligence (AI) to drive its software, so it's no wonder it's a top stock choice among investors who want a piece of the AI boom. Whereas Palantir has initially been noticed by government contracts, its software has also grown in the commercial market, providing it with an enormous user base. One of the drivers of its recent growth is the release of its AI Platform (AIP) which brings AI into business operations and assists in developing AI agents to execute work traditionally performed by humans. The platform has already emerged as a key driver of Palantir's expansion, bringing in new clients and driving its stock price up. Palantir's revenues rose 36% year-over-year to $828 million in the fourth quarter, more than expectations, reported The Motley Fool. Its margins, though still robust, fell slightly as costs increased. But management is guiding to a strong repeat performance in 2025, with targeted revenue of $3.75 billion, a 31% increase for the year, as per the report. According to The Motley Fool, Palantir shares have jumped on strong growth but are now at concerning valuations. Though the firm generated 2024 profit margins of 20% and targets long-term achievement of 30%, much positivity is priced into its shares, as per analysts. Assuming Palantir has a 40% growth rate over five years, it would hit $15 billion in revenue and $4.6 billion in profits, reported The Motley Fool. Yet with a market cap of $250 billion, the stock would still be at 55 times estimated earnings in 2025. That suggests lofty expectations and 40% growth year after year is not common in the sector. To give perspective, The Motley Fool compared it with Nvidia, another AI powerhouse, that trades at 51 times earnings but is expanding more rapidly than Palantir. Palantir might continue to do well, but with its overpriced stock, investors should exercise caution, as per the report. According to The Motley Fool, it might be a good idea to take profits while the stock is high because it will either continue to soar during the AI boom or return to earth soon. Why has Palantir's stock surged? Palantir has been on fire due to its strong performance, particularly in AI. The company's AI Platform (AIP) has driven impressive growth by helping businesses integrate AI into their operations, attracting new clients. The stock rose almost 550% since early 2024, with a 50% jump in 2025 alone, due to strong Q4 results. Could Palantir's stock drop after such a huge surge? Yes, it's possible. According to analysts, Palantir's stock is currently trading at high levels, and much of its future success is already priced in. If the company fails to meet the ambitious growth expectations, the stock could experience a correction, as per The Motley Fool. As with any high-growth stock, there's a chance it could either keep climbing or come back down to more reasonable levels.

Why Palantir Technologies Stock Rallied on Tuesday

Palantir Technologies (PLTR 4.58%) stock continued to run higher on Tuesday, climbing as much as 4.9%. By the time the market closed, the stock was still up 4.6%. The catalyst that sent the artificial intelligence (AI) software and data mining specialist higher was word that one of the country's largest retirement systems is bullish on the stock. The Lone Star State In a regulatory filing that dropped late last week, it was revealed that the Teacher Retirement System of Texas, one of the largest pension funds in the country in terms of fund size, had added Palantir to its portfolio during the fourth quarter. To be clear, it was a modest investment of roughly 521,000 shares, a stake currently worth about $62 million. That pales in comparison to the fund's total holdings of $210 billion as of late last year. While that certainly won't be enough to move the needle, it acted more as confirmation for investors that -- despite its high valuation -- an increasing number of professional investors and fund managers are adding Palantir to their portfolios. In fact, recent data released by Nasdaq estimates that institutional ownership of Palantir has risen to more than 52%, amounting to nearly 2.2 billion shares. Furthermore, nearly 1,300 professional money managers increased their Palantir holdings, while roughly 650 decreased their positions. The excitement surrounding Palantir has been palpable, which has driven the stock up more than 400% over the past year (as of this writing). Unfortunately, there's been a commensurate increase in its already frothy valuation. The stock is currently selling for 225 times next year's expected earnings, which doesn't give the company much margin for error. Any failure to live up to the market's lofty expectations could bring the stock crashing down. To be clear, I'm a Palantir bull, but I'm also a realist. I find it hard to reconcile the company's current valuation with its expected growth over the next few years.

Where Will Palantir Technologies Be in 5 Years? | The Motley Fool

Palantir Technologies (PLTR 0.44%) stock is off to a remarkable start in 2025, rising more than 54% as of this writing on account of the company's accelerating growth and fast-improving revenue pipeline that points toward a bright future. The software specialist has established itself as a key player in the artificial intelligence (AI) space. Palantir's Artificial Intelligence Platform (AIP), which helps customers integrate generative AI capabilities into their operations, has become a runaway hit. This is evident from the company's rapidly growing customer base as well as a jump in spending by existing customers on its offerings. Given that Palantir is tapping a market that's just taking off, it won't be surprising to see the company sustaining its impressive growth over the long run. Let's take a closer look at Palantir's prospects and check if it is still worth buying the stock in anticipation of more upside over the next five years. The demand for AI software is set to rise remarkably through 2030 as more businesses and organizations are likely to adopt this technology to drive efficiency gains and improve productivity. According to one estimate, global spending on AI software could jump nearly fourfold between 2024 and 2030, generating annual revenue of more than $391 billion by the end of the decade. Palantir finished 2024 with revenue of $2.87 billion, an increase of 29% from the prior year. Its revenue growth rate picked up last year as compared to the 17% increase in its top line in 2023 as more customers started using AIP. Palantir ended 2024 with 711 customers, an increase of 43% from the prior year. More importantly, the company seems to be building a high-quality customer base as its existing customers ramp up their spending on Palantir's offerings. This is evident from the 12-percentage-point increase in its net dollar retention rate in the fourth quarter of 2024 to 120%. Palantir calculates the net dollar retention rate by dividing the trailing 12-month revenue from its customers at the end of a quarter by the trailing 12-month revenue from those same customers in the year-ago quarter. So, a reading of more than 100% means that Palantir's existing customers are spending more on its solutions. Palantir management pointed out on the latest earnings conference call that AIP is one of its key growth drivers: AIP continues to fuel new customer acquisition as we have nearly five times the number of U.S. commercial customers as we did three years ago and significant expansion opportunities at existing customers. Palantir presented many examples on the earnings call about how customers using AIP have significantly improved the efficiency of their operations. As a result, it won't be surprising to see more customers adopting this platform, while existing customers could sign bigger deals with Palantir as they deploy AI into more areas. What's worth noting is that Palantir's total contract value (TCV) shot up an impressive 56% year over year in the fourth quarter of 2024 to $1.8 billion, significantly outpacing the 29% jump in its top line. Another metric that shows Palantir is setting itself up for long-term success is its remaining deal value (RDV), which is the total remaining value of contracts that the company is yet to fulfill at the end of a quarter. This metric jumped 40% from the year-ago period to $5.4 billion. Palantir's RDV is well above the revenue that it generated last year, suggesting that the company's growth is likely to pick up pace in 2025 and in the long run. Moreover, as Palantir is getting more business from its existing customer base, it is ideally spending less money to acquire new revenue. This is translating into robust growth in its margins and earnings. For instance, Palantir's adjusted operating income jumped by 11 percentage points in 2024. As a result, its bottom line shot up an impressive 64% to $0.41 per share last year. Analysts expect strong growth in Palantir's earnings for the next couple of years as well. The discussion above indicates that Palantir may be able to outpace Wall Street's earnings expectations over the next five years as the spending on AI software accelerates. That could help the stock deliver more upside, though there is one major challenge for anyone looking to invest in Palantir right now. Palantir stock trades at a massive premium following its incredible rally in the past year. It trades at more than 102 times sales and has a trailing price-to-earnings ratio of 633. There is no doubt that Palantir is on track to make the most of the massive opportunity in the AI software market. Its numbers are proof that it is indeed gaining ground in this space, but the valuation seems a bit detached from reality. The only way Palantir can justify this valuation is by regularly outperforming consensus expectations and displaying further acceleration in its growth. The good part is that Palantir does seem capable of doing that given the pace of its customer additions and an increase in the size of contracts that it is signing, all of which have helped it build a terrific revenue pipeline and contribute toward healthy unit economics. Also, the company seems set to grow at a faster pace than the AI software market over the next five years, considering the jump in its RDV last quarter and its position as one of the leading sellers of AI software platforms. All this could translate into more upside in Palantir stock in the long run, but investors who are looking to buy the stock would do well to assess their risk profile as its sky-high valuation opens up the possibility of a sharp dip in the stock price in case any cracks appear in its growth story.

Palantir Stock Investors Just Got Great News and a Trillion-Dollar Target From Wall Street | The Motley Fool

Palantir Technologies (PLTR 4.24%) was the best-performing member of the S&P 500 (^GSPC -0.27%) last year. Shares jumped 340% amid soaring demand for its artificial intelligence platform AIP, and that momentum has carried into the current year. The stock has advanced 49% in 2025 as of Feb. 11, such that Palantir is once again the best-performing member of the S&P 500. Wall Street has been consistently and overwhelmingly bearish on Palantir. In December, it ranked among the 10 stocks in the S&P 500 with the highest percentage of sell ratings, and it was the most overvalued stock in the index based on the discrepancy between its share price and median target price. But sentiment has changed dramatically in the last two weeks. Since Palantir reported its fourth-quarter results, numerous analysts have made substantial upward revisions to their earnings forecasts and fair value estimates. Dan Ives at Wedbush Securities even predicted Palantir could be a trillion-dollar company within a few years. Here are the important details. Palantir reported fourth-quarter financial results that crushed Wall Street's estimates on the top and bottom lines. Its customer count increased 43% to 711, and the average existing customer spent 20% more. Revenue rose 36% to $828 million, the sixth straight acceleration, and non-GAAP earnings increased 75% to $0.14 per diluted share. Palantir also gave stronger guidance than Wall Street anticipated. Management estimates that first-quarter revenue will increase 36% to $860 million in 2025, while full-year revenue increases 31% to $3.7 billion. That upbeat outlook led multiple analysts to raise their earnings forecasts and fair value estimates, as detailed below: Admittedly, the average target of $92.50 per share still implies 17% downside from the current share price of $112. But Wall Street has consistently underestimated Palantir, and that pattern may continue. Palantir has a strong presence in the artificial intelligence (AI) platforms space -- its market share is second only to that of Microsoft -- and spending on AI platforms is projected to increase at 40% annually through 2028. Dan Ives is the senior equity analyst and global head of technology research at Wedbush Securities. He has consistently been bullish on Palantir despite widespread pessimism from his peers on Wall Street. In August 2023, Ives told CNBC Palantir was "probably the best pure-play AI name" on the market. In March 2024, he called Palantir's AIP product a launchpad of AI use cases. And in December 2024, he said Palantir could be the next Salesforce or even the next Oracle, a comparison that implies its revenue could increase by an order of magnitude in the future. However, Ives recently made his boldest prediction to date following the company's strong performance in the fourth quarter. He told Schwab Network that Palantir could have a $1 trillion market capitalization within two or three years. That implies 300% upside from its current market value of $250 billion. Palantir stock currently trades at 270 times adjusted earnings. That valuation multiple is absurdly expensive for a company whose earnings are projected to grow at 31% annually through 2026. In fact, that valuation would be expensive even if Palantir's earnings increase twice as fast as Wall Street anticipates. However, I also think Palantir will be worth more in the future. The company may even hit the trillion-dollar target set by Dan Ives. With that in mind, long-term investors eager to own shares can buy a very small position today, provided they understand the stock could decline sharply at the first hint of bad news. Personally, I think the most prudent course of action is to wait for better buying opportunities. Investors can build a position over time by purchasing a few shares each time the stock dips, so long as the investment thesis remains sound.

How High Can Palantir Technologies Stock Go? | The Motley Fool

Shares of Palantir Technologies (PLTR 4.24%) continue to prove all the doubters wrong. Despite its seemingly egregious valuation, the stock continues to soar. Earlier this month, the company released its latest earnings numbers, which looked strong yet again. After another impressive performance, shares of Palantir are once again hitting new highs. Is it finally approaching a peak, or could the stock still go a whole lot higher this year? A big challenge for tech companies is that as their businesses grow, they are going up against stronger comparable sales numbers from the previous year. That makes it difficult for a business to maintain a high rate of growth. In Palantir's case, however, that hasn't been a problem at all. Its growth rate has been accelerating. The business was showing signs of slowing down in 2023. But its new Artificial Intelligence Platform (AIP) provides customers with new ways to enhance and improve their decision-making, leading to tremendous growth. CEO Alex Karp says the company has a "deepening position at the center of the AI revolution." When a business is growing as fast as Palantir, it's easy to see why the AI stock continued to rally. The only problem is that at a forward price-to-earnings multiple (P/E) of around 200 (which is based on analyst expectations) and at 100 times its trailing revenue, it's hard to find a metric that can justify the company's mammoth valuation. Analysts who cover a stock set price targets regularly, and investors often look to them to get an idea of how much upside a business may have. After Palantir's latest earnings numbers came out, many analysts upgraded their price targets for the stock. And while there are many who have price targets set at over $100, the consensus analyst target is $69 -- nowhere near the $116 it costs as of this writing. Between what analysts are projecting for the stock, and its enormous valuation metrics, it's hard to make a case for why it can still go higher. This is an AI stock that defied reasonability for months, and that puts it in dangerous territory as its extremely high valuation makes it ripe for a sell-off should there be a downturn in the markets. Palantir was a business worth more than Wells Fargo, one of the top banks in the entire country. It's also worth more than McDonald's, Walt Disney, and many more top blue-chip companies. Its valuation doesn't make sense, and if it was a speculative buy before this recent rally, it's even more of one now. It's a data analytics company that is benefiting from the AI hype in more ways than one -- through greater sales numbers, and through a seemingly unstoppable wave of bullishness. While it has been doing well, investing in it today involves ignoring valuations, ignoring the risk of a potential slowdown in AI spending in the future, and simply hoping to profit from what's known as the greater fool theory. The stock can very well rise in value from here, and I certainly wouldn't rule it out; the markets aren't always rational, as is clearly the case with Palantir Technologies. But that doesn't mean its current price, much less a higher one, is going to be sustainable over the long run. Investors should buy the stock at their own risk.

Palantir stock has been on a tear. But a reckoning could come soon

Palantir Technologies (PLTR-3.24%) is the top-performing stock in the S&P 500 to start 2025, soaring 50% so far this year. But the software company's bright earnings prospects won't be enough to protect investors from short-term pain as its share price eventually returns to more normal levels, some analysts say. The stock, which dipped about 3.5% to close at $112.62 per share on Tuesday, has still surged about 35% since the company reported better-than-expected fourth-quarter earnings earlier this month. And it's up a whopping 350% over the last 12 months. That's taken Palantir's price-to-earnings ratio to almost 600, and about 200 based on projected 12-month earnings. The overall current PE for the Nasdaq is about 42. "The stock's not made of teflon," said Bob Lang, founder and chief options analyst at Explosive Options. Palantir is trading at about 150% of the 200-day moving average, which Lang called an "extraordinary" level that can't last forever. "Eventually the rally will peter out as investors get exhausted," Lang said. The company, which builds software for big data analytics companies, earlier this month reported revenue of $828 million for the fourth quarter -- a 36% jump year over year. Revenue from the U.S. government grew 45%. Palantir's projections for sales and profit in 2025 both topped analysts' estimates. Palantir may trigger a selloff if it opts to sell new shares to take advantage of its current, much higher market valuation, Lang said. The could quickly test the $84-$87 level. However, even at $90 per share, there would still be an uptrend. Lang remains optimistic about the company's earnings prospects. He said analysts' estimates of 25% growth in 2026 are far too low as Palantir secures new work, especially from governments. Michael Rechenthin, head of R&D at tastylive, a streaming platform geared toward options traders, shared both Lang's optimism about Palantir's potential work for the Trump administration -- and his caution about the stock's immediate prospects. "Revenues and net income have been increasing quarter after quarter -- but not by the rate at which is stock is growing," Rechenthin said. He said he won't be adding to his position at this level. In August, Palantir and Microsoft (MSFT-0.20%) announced that they were deepening their partnership to provide secure cloud, AI, and analytics capabilities to U.S. defense and intelligence agencies. Through the partnership, agencies will have access to Microsoft's Azure cloud compute and large language models, or LLMs, including OpenAI's GPT-4, through its Azure OpenAI Service that will be integrated with Palantir's AI Platforms (AIP). Palantir's products will be deployed in Microsoft's Azure cloud for government, including clouds for top secret use.

Palantir rockets to $100! Is this AI stock still a smart Buy? Here's what analysts say

Palantir Technologies' stock price surged from $6 to over $100 due to AI-driven growth, especially in the US market. Analysts are divided on its valuation, with some claiming it's overvalued despite its potential. Palantir Technologies traded for just $6 per share at the start of 2023 and now the AI-driven software company's stock price surged past $100 following a stellar earnings report in the fourth quarter of 2024, reported The Motley Fool. The company's rapid growth, particularly in the AI sector, has led investors to wonder if Palantir may be the next era-defining tech giant, as per the report. The software company has been called a "software juggernaut" by CEO Alex Karp, and most analysts are finally coming around to that view, reported The Motley Fool. The report added that Palantir's US revenue alone increased by 52% year over year to $558 million. Commercial US revenue grew by an even faster rate of 64%. The AI-powered platform is sweeping up businesses, in every industry imaginable, aiming to get higher margins, develop better customer satisfaction, and sell more. Despite the rapid growth in Palantir, a few analysts are not pleased with the valuation which may be too high at least in the short term. According to Will Healy, the forward P/E is way above 200, and this says the stock price is years ahead of the company's growth. Further, the company, with a price-to-book value of 51, has been able to record a number that is exponentially far away from what is average in the S&P 500. In short, as much as it is true that Palantir is growing phenomenally and certainly found a strong niche in AI software, stock performance has become rather detached from its fundamentals lately. The present market cap of around $250 billion makes it much bigger than even McDonald's and Cisco and more than Adobe companies, but revenues for Palantir are merely a fraction of those businesses. Despite these concerns, Palantir's potential is undeniable. Justin Pope notes that while the stock may be expensive by traditional metrics, exceptional companies like Palantir can defy conventional valuation wisdom. The AI opportunity is massive, and Palantir's uniquely flexible software places it in an excellent position to capitalize on it. Some estimates suggest that AI could create trillions of dollars in economic value over the coming years, and Palantir is well-positioned to capture a significant chunk of that. While Palantir has shown exceptional growth, analysts are split on whether the stock has further upside in the short term or whether a pullback is on the horizon, as per the report. Is Palantir overvalued? According to some analysts, Palantir's stock may be overvalued at the moment, especially given its high price-to-earnings (P/E) ratio and price-to-book ratio. While the company is growing fast, some experts feel the stock price is ahead of its actual financial performance in the short term. What's the risk with Palantir? The main risk with Palantir is that its stock may have outpaced its actual growth, as per the report. If the company's growth slows or if the market re-evaluates its valuation, the stock price could drop. It's important to be aware of the potential for short-term price swings.

Where Will Palantir Stock Be in 3 Years? | The Motley Fool

Over the last couple of weeks, stocks in the technology sector have been selling off as investors entered a panic fueled by the Chinese artificial intelligence (AI) start-up DeepSeek. One AI company that has bucked the trend, however, is data analytics provider Palantir Technologies (PLTR 0.44%). So far this year, Palantir is the highest performing stock in the S&P 500 (^GSPC 1.04%) -- gaining 48% as of this writing (Feb. 12). Let's explore why Palantir's shares are rocketing higher while many of its peers continue selling off. I'll detail why Palantir's gains are justified and assess where shares could be headed over the next few years. The chart below illustrates Palantir's quarterly revenue trends for the last couple of years. To me, the steepening slope of the revenue lines validates that demand is not just strong for Palantir's AI product suite -- it's accelerating. What makes the financial profile even better is that Palantir is consistently achieving high levels of operating leverage. What I mean by that is the company's profit margins are widening, thereby strengthening Palantir's cash-flow generation and liquidity position. Strong unit economics places Palantir in an advantageous position relative to its peers in the software arena, many of which are still burning cash or simply aren't growing at anywhere near the pace of Palantir. Palantir has entered a phase in which, each quarter, the company seems to blow Wall Street's estimates out of the water. While this is encouraging, I would argue that it's not totally uncommon for top-tier growth companies to be able to do this. As such, I think investor enthusiasm for Palantir should be indexed against a thorough valuation analysis to see if the company's share price gains are warranted. In the chart above, I've benchmarked Palantir against a cohort of leading software companies in the data analytics and security spaces. The clear anomaly shown is Palantir's valuation relative to its peers. The company's price-to-sales (P/S) ratio of 100 is more than threefold the next closest comparable company. When you take profits into account, Palantir's valuation appears even more stretched. Right now, Palantir trades a price-to-earnings (P/E) multiple of over 600 and a forward P/E ratio of roughly 200. On the one hand, I applaud Palantir for its ability to compete in such an intense environment -- namely, enterprise software. The company has demonstrated its ability to navigate around big tech and carve out lucrative pockets for itself in the broader AI realm. But while this is encouraging to see, I think the company's valuation has become disconnected from reality. To me, it's just too difficult to see a company doing roughly $3 billion in revenue trading at a market capitalization of over $260 billion. This isn't to say that Palantir's prospects aren't bright, but the ongoing momentum in the stock should make investors think twice about where shares could be headed in the long run. As time goes on, expectations are likely going to be exponentially higher with each passing earnings call. As such, Palantir is in somewhat of an unenviable position -- the company could have a terrific quarter but not live up to lofty (and unrealistic) expectations, making a sell-off in the stock possible at any time. While I very much believe in Palantir's long-term vision, my candid opinion is that the stock is overvalued today. And for this reason, I actually wouldn't be surprised to see the company's valuation begin to normalize over the next few years. At this point, I think Palantir is more of a stock to trade than buy and hold. If you're a long-term investor looking for exposure to growth stocks in the AI sector, I think there are more prudent options than following the momentum in Palantir at this moment.

Where Will Palantir Be 5 Years From Now? The Answer May Surprise You. | The Motley Fool

Palantir Technologies (PLTR 1.06%) is one of the market's hottest artificial intelligence (AI) stocks. The stock has already risen 55% in 2025, on top of an incredibly strong 2024. Thanks to its growth over the past year, it has become one of the top AI software players. However, what happened in the past is over; investing is about where a stock is heading. While short-term stock movements can affect the price you pay, investors should be focused on where the stock is going over the long term, which I typically quantify as five years. So, where will Palantir be in five years? I think the answer could be surprising to most investors. Palantir's platform can be summed up fairly simply: Data in, insights out. Its software was originally intended for government use and designed to take in all the available information and then spit out recommendations as to what those with decision-making authority should do. On the government side, Palantir's software has been used to handle anything from vaccine distribution to allegedly finding Osama bin Laden's final hideout. This software eventually found solid use cases on the commercial side, so Palantir is in a lucrative position to sell to both government and commercial businesses. While the company's base software is still popular, the biggest driver of Palantir's latest round of growth has come from a new product: AIP (Artificial Intelligence Platform). AIP allows its users to interweave Palantir's AI products throughout the inner workings of a business or government entity. This is the next step toward AI integration, as it moves from being a tool used on the side to something that is required to perform daily tasks. Additionally, AIP gives developers the ability to create AI agents that can do tasks automatically. This has been a massive growth driver for Palantir, and it translates directly to its strong financial performance. Palantir CFO Ryan Taylor stated on the company's fourth-quarter earnings call, "AIP continues to fuel new customer acquisition, as we have nearly five times the number of U.S. commercial customers as we did three years ago and significant expansion opportunities at existing customers." He's absolutely right, as Palantir's commercial customer count rose 15% quarter over quarter, the fastest acquisition pace in 2024. This helped fuel commercial revenue growth of 31% in Q4. However, government revenue shouldn't be ignored, either. In Q4, government revenue grew 40% year over year, outpacing commercial revenue by a significant margin. Government revenue is still a large component of Palantir's business, making up 55% of its total. So, government revenue needs to continue doing as well as it is for Palantir to continue growing at its impressive 36% year-over-year pace. This is all impressive, but how does it give investors insight into where Palantir will be five years from now? The market has loved Palantir's results and bid up the stock accordingly. Palantir is now one of the most valuable software companies on the market, valued at around $270 billion. However, there's a lot of fluff baked into Palantir's stock right now, as it trades for an astounding 100 times sales and 618 times trailing earnings. Those valuations are unbelievable, and not many investors can make a profit moving forward with those expectations baked into the stock. But can Palantir prove the doubters wrong? Let's take a look at Palantir's bull-case scenario. I'll assume these three things: Clearly, this assumes the best outcome for Palantir's business over the next five years. But where does that leave the stock? If Palantir achieved these numbers, its revenue would rise from $2.86 billion annually to $15.4 billion, and profits would increase from $462 million to $4.62 billion. That's a pretty amazing run, but where would it leave the stock valued? Those figures (combined with share count growth) would lead to earnings per share (EPS) of $1.58. Using these projections, Palantir's stock trades at 74 times 2029 earnings. That's still a very expensive valuation, and it would require the stock price to not rise from today until 2029. Remember, that's with the most bullish projections, so I think it's safe to say that Palantir's stock is incredibly overvalued at current levels. I expect its business to succeed over the next five years, but eventually the bubble will burst on the stock and send it back to more reasonable levels. So, where will Palantir's stock be in five years? I'd guess it will be valued at the same price or even less.

The clock's ticking on Palantir: Analysts predict a stock plunge, should investors brace for impact?

Analysts worry about Palantir Technologies' sustainability of its explosive growth. With AI-powered platforms and extensive government contracts, the company's high valuation may pose risks if investor excitement diminishes.Palantir Technologies, the data-mining firm that has captured Wall Street by storm, is now under growing scrutiny by analysts despite continuing its meteoric ascent, as per a report. The stock of Palantir has gained more than 1,700% since January 2023. It is currently one of the top 10 most valuable tech firms and has a market capitalization of $266 billion. However, analysts have become cautious that the explosive growth in the stock might not be sustainable, according to The Motley Fool. Palantir's success is based on its products, such as its AI-powered Gotham platform, which the government and military use to sort through vast records of data, wrote The Motley Fool. Palantir's government contracts for a decade have provided the company with a steady stream of cash, the report added. In addition to that, Palantir's Foundry platform, which uses machine learning to help firms manage information, may provide a double-digit sales growth rate, as per the report. Still, despite these positives, Wall Street's sentiment regarding Palantir is souring. As of February 10, most analysts predicted a decline in the stock, reported The Motley Fool. However, only Bank of America Securities analyst Mariana Perez Mora's price target was $125 per share, which is above Palantir's share price of $116.65, as per the report. According to The Motley Fool, the problem is Palantir's astronomical valuation. The company's price-to-sales ratio (P/S) stands at 93, well beyond the average for tech firms, even surpassing industry behemoths Amazon and Cisco at their height. According to The Motley Fool, history shows that firms growing this fast, particularly those who are benefiting from new technology, tend to see their stock price plummet once the excitement fades. The current environment and bloated stock prices are concerning for analysts. Those investors who've climbed aboard the AI bandwagon may need to tread carefully, as the historical record shows us that Palantir's tremendous growth isn't likely to last forever, reported The Motley Fool. How has Palantir's stock performed? Palantir's shares have jumped 1,700% since January 2023, ranking it among the top 10 most valuable technology companies with a market capitalization of $266 billion. What's the risk to Palantir's stock? According to The Motley Fool, the biggest risk to Palantir's stock is its high valuation. According to analysts, if the hype over AI and big data subsides or fails to meet investors' expectations, Palantir's stock price may fall.

Nearly Every Wall Street Analyst Expects Palantir Stock to Decline -- Are They Right? | The Motley Fool

For the better part of the last two-plus years, the bulls have been in control on Wall Street. The mature stock-fueled Dow Jones Industrial Average, broad-based S&P 500, and growth-focused Nasdaq Composite have all reached numerous record-closing highs. Though the return of Donald Trump to the White House has lit a fire under Wall Street in recent months -- the Dow Jones, S&P 500, and Nasdaq skyrocketed by 57%, 70%, and 142%, respectively, during his first term -- there's little question that the stock market's biggest catalyst has been the evolution of artificial intelligence (AI). Artificial intelligence empowers software and systems to reason, act, and evolve, all without the need for human intervention. It's a technology that offers use cases in all sectors and most industries around the world and can, per PwC in Sizing the Prize, increase global gross domestic product by 26% come 2030. While semiconductor colossus Nvidia has been the face of the AI revolution, it's ceded its pedestal as the hottest AI stock on the planet to data-mining specialist Palantir Technologies (PLTR 4.24%). Since the start of 2023, shares of Palantir have increased by more than 1,700%. What's more, Palantir finds itself as one of the 10 most-valuable tech stocks ($266 billion market cap, as of the closing bell on Feb. 10) on U.S. stock exchanges. Although Palantir's ascent has been nothing short of awe-inspiring, Wall Street's consensus foreshadows trouble to come for the hottest AI stock on the planet. The fuel that's powered Palantir's otherworldly stock increase is its seemingly impenetrable moat. No other company is particularly close to competing with the software-as-a-service solutions Palantir can offer at scale. Palantir's breadwinner has long been its AI-inspired Gotham operating platform. Gotham is used by federal governments as a way to gather copious amounts of data, along with plan and execute missions for the military. The contracts Gotham earns usually last for four or five years, which has led to highly predictable operating cash flow and recurring profitability. To build on this point, Gotham is ideally positioned to benefit from President Donald Trump's America-first philosophy. The Trump administration aims to protect domestic AI intellectual property, which more than likely will lead to additional contract wins for Palantir over the coming four years. Investors are also excited about the long-term potential of Foundry -- Palantir's machine learning-powered platform that helps businesses make sense of their data. Foundry is still in its very early stages of expansion and should help Palantir easily sustain a double-digit sales growth rate. This combination of irreplaceability, profitability, and ideal positioning under the Trump administration, helped to make Palantir Technologies the hottest AI stock. Yet, as of the closing bell on Feb. 10, only one Wall Street analysts' price target -- $125 per share from Bank of America Securities analyst Mariana Perez Mora -- remains above Palantir's share price of $116.65. In other words, nearly every Wall Street analyst who's issued a price target on Palantir expects its stock to decline. The all-important question investors have to ask is: Can Palantir prove an overwhelming majority of analysts, who tend to be reactive rather than proactive with their price targets, wrong? To answer this question, let's allow history to be our guide. Parabolic moves higher are nothing new for the market-leading businesses ushering in game-changing technologies on Wall Street. For the last three decades, companies on the cutting edge of the hottest trends, including the advent of the internet, genome decoding, 3D printing, blockchain technology, the metaverse, and artificial intelligence, have all soared. However, one consistency with next-big-thing innovations is that professional and everyday investors overestimate early adoption rate and utility. For 30 years, every hyped next-big-thing has eventually given way to a bubble-bursting event. In short, history would suggest that AI is simply the next in a long line of potentially game-changing technologies that will need more time to mature than is being given by investors. If an AI bubble were to form and burst, Palantir would be somewhat insulated due to the multiyear contracts it's signed with the U.S. government. Nevertheless, bubble-bursting events are often driven by emotion, which would almost certainly be bad news for Palantir stock. The far bigger worry for Palantir, based on what history tells us, is its extremely extended valuation. Though its seemingly impenetrable moat is worthy of a premium valuation, its stock closed out Feb. 10 at a staggering price-to-sales (P/S) ratio of 93, based on full-year sales in 2024. To put into context just how far out of the norm this is, Amazon and Cisco Systems peaked at respective P/S ratios of around 40 prior to the dot-com bubble bursting. Meanwhile, Nvidia's P/S ratio topped out above 42 last summer. Most businesses on the leading edge of a game-changing technology fizzle out in a P/S range of 30 to 40. Palantir has more than doubled this range and is approaching a virtually unheard-of triple-digit P/S ratio. While Palantir stock has been able to buck Wall Street's prognostications thus far, history paints a pretty clear picture that its parabolic climb won't be sustainable.

Is the Bubble About to Burst for Palantir Technologies Stock? | The Motley Fool

It seems nothing can go wrong for Palantir Technologies (PLTR -3.45%) these days. Shares of the artificial intelligence (AI) and data analytics software company skyrocketed 167% in 2023 and 340% in 2024. So far this year, the stock is up more than 50% -- a remarkable gain in only six weeks. But all good things must end sooner or later. Is the bubble about to burst for Palantir? Before I go any further, I'll readily admit that some would challenge the view that Palantir stock is in a bubble. For example, Wedbush analyst Dan Ives wrote to investors in January that Palantir's "game-changing AIP technology is quickly becoming a key foundational platform for enterprises heading down the AI use case path across verticals," according to media reports. Ives believes that Palantir will profit from increased U.S. government spending on AI. He also thinks the company has tremendous opportunities to expand its U.S. commercial business. Palantir's 2024 fourth-quarter update reported on Feb. 3, 2025, certainly provided reasons for optimism. Revenue jumped 36% year over year to $828 million with U.S. revenue soaring 52%. Palantir closed 129 deals valued at $1 million or more in Q4. Thirty-two of them were worth at least $10 million. The company projects revenue growth of 31% in fiscal year 2025. Its press release unabashedly noted that this outlook was "eviscerating consensus estimates." Palantir Technologies CEO Alex Karp said in the company's Q4 earnings call, "You know, the part of the reason we've done so well is the experts look to the past as an indication of the future when we're looking to the future as an indication of the present." He added, "We are at the beginning of our trajectory. We are at the way beginning of a revolution." If Karp is right, any talk of a bubble could be completely off base. However, you've probably heard the saying, "If it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck." This adage can be readily applied to stock bubbles. The definition of a stock bubble is a period when the share price rises rapidly without underlying business fundamentals supporting the rise. There's a good case to be made that the bubble duck is quacking for Palantir. Over the last 12 months, Palantir's share price has skyrocketed nearly 380%. As previously mentioned, its quarterly revenue has increased by 36%. The company's full-year fiscal 2025 guidance projects slower growth of 31%. There appears to be a disconnect between stock growth and business growth. Palantir's shares trade at 196 times forward earnings and 94.8 times trailing 12-month sales. Those lofty valuations might be defensible if the company's revenue and earnings were growing by truly jaw-dropping rates and were accelerating. But they're not. Perhaps Ives' bullish take on Palantir is right. It's important to note, though, that he's an outlier on Wall Street. Of the 23 analysts surveyed by LSEG in February, only three recommended the stock as a "buy" or a "strong buy." The average 12-month price target for Palantir is roughly 29% below the current share price. Let's assume, therefore, that Palantir stock is indeed in a bubble. Returning to our original question, is this bubble about to burst? The best answer is... maybe, maybe not. Bubbles can last a lot longer than you might think. For example, remember the dot-com bubble of the 1990s? Then-Federal Reserve chairman Alan Greenspan made his famous remark about "irrational exuberance" in December 1996. The dot-com bubble didn't burst until 2000. The bottom line is that the attractiveness of stock prices, like beauty, is in the eye of the beholders. As long as enough investors think that Palantir's share price could continue rising, it will. For a bubble to burst, more investors must think there is a bubble than not. That might not happen with Palantir for a while.

Palantir's path to a Trillion? Wall Street just gave investors a huge boost; here's what analysts are saying

Palantir Technologies continues to surge, fueled by its AI platform, and saw its stock rise by 49%. Analysts, particularly Dan Ives from Wedbush Securities, predict Palantir could reach a $1 trillion market cap in two to three years. Recent impressive Q4 performance and upward revisions of earnings forecasts reflect this optimism.Palantir Technologies has been riding high since last year and continued to do so even this year. Following last year's incredible 340% surge, Palantir's stock is up again by another 49% as of February 11, as per a report. The fuel behind the spike is the company's artificial intelligence platform (AIP), with its increasing demand as more organizations seek to make use of AI for enhanced efficiency and decision-making. Wedbush Securities senior equity analyst Dan Ives claimed that Palantir could have a $1 trillion market capitalization within two or three years, reported The Motley Fool. That implies a 300% upside from its current market value of $250 billion, as per the report. Ives has consistently been bullish on Palantir even though there is widespread pessimism from his peers on Wall Street. According to The Motley Fool, Wall Street has been consistently and overwhelmingly bearish on Palantir. It ranked among the 10 stocks in the S&P 500 with the highest percentage of sell ratings, in December. Palantir was the most overvalued stock in the index based on the discrepancy between its share price and median target price. But that sentiment is beginning to change, particularly after the company posted impressive fourth-quarter earnings that beat expectations both on the top and bottom lines, as per the report. Numerous analysts have made upward revisions to their earnings forecasts and fair value estimates, reported The Motley Fool. One analyst even predicted Palantir could be a trillion-dollar company within a few years. Palantir's customer base expanded 43%, and its current customers spent 20% more, as per the report. This boosted revenue by 36% to $828 million. The firm also provided better-than-expected 2025 guidance. According to the management, first-quarter revenue will increase 36% to $860 million in 2025. While full-year revenue will increase 31% to $3.7 billion. According to The Motley Fool, Wall Street predicted that Palantir's adjusted earnings will increase by 31% annually to reach $0.70 per diluted share in 2026. As per LSEG data, Palantir has an average 12-month target price of $92.50 per share. That fair value estimate is 106% higher than it was one month ago, and 182% higher than it was three months ago. But Palantir's stock is quite pricey, trading at 270 times adjusted earnings. Though expensive, many investors are wagering that Palantir's dominance in the expanding AI market is good for a long-term investment, as per The Motley Fool. What are analysts predicting for the future of Palantir? Analysts are more positive about the future of Palantir. Wedbush Securities' Dan Ives forecasted that the company may have a $1 trillion market cap in two or three years. Is Palantir a good investment? Palantir is an expensive stock, priced at 270 times its adjusted earnings. Yet investors are wagering on its long-term prospects, particularly with its robust position in the fast-growing AI space.

Move over Amazon and Nvidia: This is the secretive data analytics giant that everyone is talking about; here's all about the tech company

Palantir is gaining significant traction in the tech world with its AI-driven services, experiencing a dramatic stock increase. The company's technology is valued for assisting the military and healthcare sectors but elicits controversy over data privacy concerns. Analysts advise caution due to mixed evaluations on stock valuation.If you haven't yet heard about Palantir, you better be getting ready to. This data analytics company is stirring things up in the tech arena, and its story is one of spectacular growth, as per reports. Palantir's stock price has increased by almost 1,100% in the last five years and investors are watching it recently as analysts consider it might overtake giants such as Amazon and Nvidia, reported Daily Mail. Palantir has grown in market cap to $253 billion since its stock price has soared 336% in just 6 months, as per reports. According to Daily Mail, it has been a great ride for those who invested very early and some analysts are betting that the company may even cross $1 trillion in valuation in the next few years. The reason is increased demand for its AI-based services. CEO Alex Karp admitted that Palantir's technology is "making America more lethal" by working with military and government agencies to power AI applications to counter global threats, as per the report. Using AI to tackle hard problems is Palantir's secret formula, and its growing client list is an indicator that this technology is changing the game, reported Daily Mail. From the US military to the likes of Airbus and Merck, Palantir is also present in industries like national security, defence, and health care. For instance, during the COVID-19 pandemic, Palantir was key in managing vaccine distribution with the NHS in the UK. According to Daily Mail, its success has not come without controversy. Palantir's closeness with government agencies, in particular, the Defense Department and the CIA, has raised concerns. Critics are wary of the safety of sensitive data in projects like that of NHS and Palantir managing patient records. Nevertheless, the company has supporters known as "Palantirians". Some analysts have said that there is no limit to the increase of Palantir's share value and they are calling it the "Messi of AI", owing to its unparalleled capabilities from the tech standpoint. With connections like Peter Thiel, Elon Musk, and JD Vance, Palantir will have an enhanced chance of surviving, especially as national security and space exploration are gaining more traction, as per the report. However, analysts suggest to be cautious before investing as not everyone agrees that Palantir stock is bound to go higher. The majority of analysts rated the share a 'hold', rather than a 'buy'. Some analyst reports deem the stock shares overpriced and short sellers are betting against it. However, for anyone holding onto Palantir shares, many analysts advise holding onto them, with target prices pegging at $120-$125 per share. Why has Palantir's stock been growing so rapidly? Palantir's stock has skyrocketed, particularly in the last six months, because of its increasing demand in the AI space. As industries across the world invest in artificial intelligence, Palantir has positioned itself as a key player. Its close work with government agencies, defence contractors, and major companies like Airbus and Merck has helped boost its value. Investors believe this demand will continue to grow, pushing Palantir's market cap even higher in the years to come. What are some of the controversies surrounding Palantir? Palantir has faced criticism over its close ties with government agencies like the CIA and the Department of Defense. Some people worry about the security of sensitive data, especially when it involves personal healthcare information, like the company's involvement with the NHS during the pandemic. The company has also been accused of contributing to the privatization of public services in some sectors, which has sparked debate about its role in the broader tech ecosystem.

Palantir Stock vs. Amazon Stock: A Wall Street Analyst Says Buy One and Sell the Other | The Motley Fool

Thill recently set his target price on Amazon at $275 per share. That forecast implies 20% upside from its current share price of $230. More broadly, Wall Street is thinking along the same lines. Palantir's median target price of $96 per share implies 18% downside, and Amazon's median target price of $270 per share implies 17% upside. Here's what investors should know about these AI stocks. Palantir reported fourth-quarter financial results that crushed Wall Street estimates on the top and bottom lines. Its customer count rose 43% to 711, and the average existing customer spent 20% more. In turn, revenue increased 36% to $828 million as sales growth accelerated across commercial and government customers. In addition, non-GAAP net income surged 75% to $0.14 per diluted share. Palantir has a particularly strong presence in the artificial intelligence (AI) platforms market, and that was a major source of momentum in the fourth quarter. "Our business results continue to astound, demonstrating our deepening position at the center of the AI revolution," said CEO Alex Karp. During a recent CNBC interview, Brent Thill at Jefferies praised Palantir for strong execution, crediting the company for monetizing AI more effectively than many peers. But he views the present valuation as unsustainable. To elaborate, Palantir has a forward price-to-sales (PS) ratio of 56. Thills says no software company has ever sustained that multiple. He drew an interesting analogy to Snowflake. That stock had a forward price-to-sales ratio (P/S) above 55 in November 2021, but Snowflake shares fell 70% in the next six months. That's particularly ominous for Palantir shareholders because Snowflake was reporting quarterly sales growth above 100%, even as its stock started to crash. By comparison, Palantir reported quarterly sales growth below 40% in the most recent quarter. That doesn't mean Palantir shares are headed for a 70% correction. But prospective investors should be cautious chasing the stock at its current valuation. I think better buying opportunities will present themselves in the future. Additionally, current shareholders who are uncomfortable with the idea of a large drawdown should consider selling some stock, especially if they currently have a large position in Palantir. Amazon reported solid fourth-quarter results that beat estimates on the top and bottom lines. Revenue rose 10% to $188 billion on good momentum in cloud and advertising services. Meanwhile, GAAP net income increased 86% to $1.86 per diluted share as operating margin expanded 350 basis points due to logistics efficiencies driven by robotics and better inventory placement. However, Amazon gave guidance that missed expectations. The company expects revenue to increase just 7% in the first quarter as the strong U.S. dollar creates currency-exchange headwinds. Additionally, the company estimates operating income will increase just 5% as investments in artificial intelligence and logistics capacity hurt margins. The stock declined following the report as investors mulled management's outlook. Concerns about higher operating expenses and capital expenditures are overblown. That spending will lay the foundation for durable growth in the coming years. Amazon operates the largest e-commerce marketplace outside of China, and Amazon Web Services is the largest public cloud worldwide. Investments in logistics capacity and AI infrastructure should further strengthen its position in those markets. Indeed, Brent Thill at Jefferies recently told CNBC that investors should expect lower margins in the coming quarters. But he believes those temporary headwinds will eventually translate into strong sales growth and higher margins. "When you have 50% market share in cloud, you have a huge advantage in AI," he added. Wall Street expects Amazon's earnings to increase at 17% annually over the next two years. That makes its current valuation at 41 times earnings look somewhat expensive. But I think analysts are underestimating earnings growth. Amazon beat the consensus estimate by an average of 29% (as measured in dollars) in the last six quarters. If that pattern continues, the stock would look cheap in hindsight. Patient investors should feel comfortable buying a few shares today.

Prediction: This Artificial Intelligence (AI) Stock Could be Worth More Than Salesforce by the End of 2025 | The Motley Fool

Salesforce's valuation has fluctuated quite a bit over the last couple of years. For the last two years, technology stocks have been rocking thanks to an overwhelmingly bullish narrative surrounding artificial intelligence (AI). Among AI's biggest winners have been software businesses, a theme that I don't see changing anytime soon. Below, I'm going to compare two of the biggest names in enterprise software benefiting from the AI revolution: Palantir Technologies (PLTR 1.06%) and Salesforce (CRM -1.00%). While each appears well positioned to continue riding the AI wave, I see Palantir as the superior choice for growth investors. Let's dig into how each of these software leaders is affecting the AI sector and assess why I think Palantir will become the bigger company by the end of the year. As of this writing (Feb. 10), Salesforce has a larger market capitalization than Palantir by roughly $52 billion. With that said, the underlying trends shown in the chart below are quite interesting. Check out the difference between how each company's valuation has moved since AI emerged as the next megatrend. Over the last couple of years, Palantir's valuation has expanded significantly. By contrast, Salesforce's price movement has exhibited far more ebbs and flows. As a result, there's a clear convergence seen in the graph below with Palantir's market value starting to encroach on that of Salesforce. Salesforce owns a number of properties including data analytics platform Tableau and messaging tool Slack. The company's prior strategy of acquiring competing businesses and integrating them with the core ecosystem helped build an end-to-end software suite that offers businesses a variety of data-driven applications, but investors eventually grew tired of such an approach. For the last couple of years, Salesforce has been under enormous scrutiny from Wall Street to start delivering more robust revenue acceleration and profit margin expansion excluding inorganic assets purchased through acquisitions. I'll admit that Salesforce has made good on this promise ... for the most part. The issue Salesforce continues to face revolves around consistency. In other words, sometimes the company blows Wall Street's expectations out of the water, while at other times investors are left scratching their heads questioning what is going on in execution. For this reason, I'm not entirely sold that Salesforce is going to dominate its pocket of the AI realm. Specifically, the company's newest area of interest, called agentic AI, faces fierce competition -- namely from Microsoft, a much larger company with a stronger balance sheet. When you add in that Salesforce faces a number of tangential competitors, including Monday.com, HubSpot, Atlassian, Asana, Workday, and more, I'm hard-pressed to see how it navigates amid all of these businesses. On the flip side, Palantir -- which is much smaller than Salesforce in revenue and earnings -- is partnering with the likes of Microsoft, Meta Platforms, Amazon, and Oracle. To me, big tech's decision to work alongside Palantir as opposed to launching competing products represents enormous potential since the company continues to scale up its biggest driver of growth, the Palantir Artificial Intelligence Platform (AIP) software suite. The chart below illustrates consensus estimates among Wall Street analysts for growth in revenue and earnings per share (EPS) between Salesforce and Palantir. The dichotomy shown above is obvious: Wall Street is estimating far less acceleration for revenue and earnings for Salesforce compared to Palantir over the next two years. My interpretation of these forecasts is that analysts may see more competitive headwinds for Salesforce when compared to Palantir. To be fair, this should be expected to some degree. Salesforce is a much larger enterprise than Palantir, and so at some point the company's growth profile is going to mature. However, I have not fully bought into that idea because AI is supposed to represent transformative opportunities for businesses of all sizes. Given the mundane growth profile for Salesforce, I'm wondering if Wall Street shares my suspicion that AI may not be as influential for the company as it could be for other software businesses, such as Palantir. For these reasons, I would not be surprised to continue witnessing some inconsistent trends in Salesforce throughout this year (and maybe even longer). By contrast, Palantir's prospects look strong, and I think investors could continue cheering on the stock -- propelling its valuation even higher during 2025. I think there could be some contraction in Salesforce's market cap and even more expansion in Palantir's, thereby tightening the gap between the two companies even further. If this happens, I think Palantir will emerge as the more valuable business by the end of the year.