Palantir Stock Faces Volatility Amid AI Hype and Valuation Concerns

Palantir Stock Drops 25% YTD From Highs As Valuation Concerns Grow: What You Need To Know - Palantir Technologies (NASDAQ:PLTR)

Feel unsure about the market's next move? Copy trade alerts from Matt Maley -- a Wall Street veteran who consistently finds profits in volatile markets. Claim your 7-day free trial now. Palantir Technologies Inc. PLTR has been one of the most volatile AI stocks this year. After surging nearly 400% in 2024, the stock has struggled in recent months, dropping 25% from its all-time high reached in mid-February. What To Know: Palantir has benefited from growing demand for its AI-powered data analytics platforms, particularly among government agencies and large enterprises. The company's revenue growth remains strong, with management projecting a 36% increase in the first quarter. However, some analysts believe this estimate may be conservative, as Palantir has a track record of setting expectations lower to deliver consistent revenue beats. Even with this growth, Palantir's stock price has been a point of concern. The stock currently trades at a price-to-sales (P/S) ratio of 77, a level that requires extreme revenue acceleration to justify. For comparison, most software companies trade between 10 and 20 times sales. At its current valuation, Palantir would need to triple its revenue annually to maintain its stock price, an unlikely scenario given its current growth trajectory. Ai Outlook: The AI investment landscape is also shifting. While businesses continue to integrate AI solutions, spending trends are becoming more scrutinized. Investors who piled into Palantir during last year's AI boom are now questioning whether the company can sustain its momentum. If revenue growth falls short or macroeconomic headwinds intensify, Palantir's stock could see further downside. Market Overview: Market-wide weakness in high-growth tech stocks has also weighed on Palantir. Other AI-related names, including C3.ai AI and Snowflake Inc. SNOW, have seen similar pullbacks, reflecting broader concerns about valuations in the sector. While Palantir remains a leader in AI-driven analytics, its current stock price leaves little room for error. The next few quarters may be crucial in determining whether Palantir can justify its high valuation. If the company continues to beat growth expectations and expand its commercial customer base, investor confidence may stabilize. However, if growth stalls or macroeconomic risks intensify, the stock could remain under pressure. PLTR Price Action: Palantir shares closed up 3.27% at $87.45 at publication Wednesday, according to Benzinga Pro. Read Next: Trump's 'Liberation Day' Tariff Reveal Set For 4 PM: What's At Stake Photo: Shutterstock. PLTRPalantir Technologies Inc$87.142.91%Stock Score Locked: Want to See it? Benzinga Rankings give you vital metrics on any stock - anytime. Reveal Full ScoreEdge RankingsMomentum99.19Growth86.56Quality-Value2.94Price TrendShortMediumLongOverviewAIC3.ai Inc$22.002.66%SNOWSnowflake Inc$153.912.92%Market News and Data brought to you by Benzinga APIs

Will Artificial Intelligence (AI) Colossus Palantir Technologies Soar 46% or Plunge 53%, According to Select Wall Street Analysts? | The Motley Fool

History tells the tale of what's to come for this high-flying AI stock. Since the start of 2023, no trend has been responsible for triggering investor excitement quite like artificial intelligence (AI). Giving software and systems the capacity to reason and act autonomously, as well as dangling the ability for machines to evolve over time, gives this technology a mouthwatering ceiling -- and Wall Street has taken notice. Based on estimates from PwC, AI can boost global gross domestic product by 26% come the turn of the decade. This is north of a $15 trillion impact that can lift the fortunes of a laundry list of companies. But as investors also know, not every company necessarily benefits from a next-big-thing trend. Although Nvidia has cemented itself as the face of the AI revolution, a strong argument can be made that AI-driven data-mining special Palantir Technologies (PLTR 0.31%) has replaced it as Wall Street's AI darling. At its February peak, shares of Palantir were approaching a nearly 2,000% trailing-two-year gain. But like many companies on the cutting-edge of a highly touted innovation, Palantir finds itself at the center of a Wall Street analyst duel. Based on the high-water and bottom-barrel price targets from select analysts, Palantir stock could soar 46% or plunge 53%. Let's briefly examine each argument and determine which is more likely to come to fruition. On one end of the spectrum is Palantir's biggest cheerleader, Mark Schappel of Loop Capital Markets. Schappel has a buy rating on Palantir and a lofty price target of $125 per share, which would lead to 46% upside, based on the $85.85 close on March 28. Coincidentally, $125 is essentially where the company's stock peaked on Feb. 18. One of the primary reasons most Wall Street analysts have expected Palantir stock to move higher is its unique positioning. This is a company with two core operating platforms -- Gotham and Foundry -- of which there are no large-scale replacements. While Palantir does have pockets of competition, the AI-empowered software-as-a-service solutions it provides aren't duplicable. This leads to highly predictable sales and cash flow generation. Analysts also appreciate the recurring profitability and steady double-digit sales growth of its Gotham platform. This segment caters to federal governments by providing data collection and analysis, along with military mission planning and execution. Palantir typically lands multiyear contracts with the U.S. government, providing heightened cash-flow transparency. But what really has Schappel excited about the future is Palantir's enterprise opportunity with Foundry. This relatively newer (but rapidly growing) platform is designed to help businesses make sense of their data in order to improve their operating efficiency. Foundry can be tasked with everything from integrating data and optimizing supply chains to making data-driving automated decisions that free up human personnel. When 2024 came to a close, Palantir had just 571 commercial customers, which represents a blistering 52% increase from the prior-year period. Foundry is just scratching the tip of the iceberg with its potential. Meanwhile, RBC Capital Markets' Rishi Jaluria, who's been a longtime Palantir pessimist, has an underperform rating on the stock and believes its shares will plunge to $40. If Jaluria is accurate, this would result in an additional 53% downside from where shares ended the previous week. Jaluria has been critical of Palantir's valuation for quite some time. While it's not abnormal for businesses with sustained competitive moats to trade at a premium, Palantir's price-to-sales (P/S) ratio hovered around 100 when it reached its peak in mid-February. No company on the leading edge of a next-big-thing investment trend has ever sustained a valuation this aggressive dating back decades. In addition to Palantir's lofty valuation, Jaluria has concerns about U.S. defense budget cuts. President Donald Trump's efforts to reduce wasteful spending and cut costs will see the Pentagon cut 8% of its budget in each of the next five years, which amounts to about $50 billion annually. Palantir's bread-and-butter has been its steady influx of new defense contracts with the U.S. government. To build on this point, Gotham has been Palantir's primary profit driver. Yet Gotham is only available to the U.S. and its immediate allies. In other words, Gotham's long-term ceiling is somewhat limited by a narrow pool of potential clients. A February note from Jaluria also points to the new trading plan for CEO Alex Karp as a worry. Karp's revised trading plan allows him to sell close to 10 million shares of stock through mid-September, which may provide downside pressure on shares of Palantir. Now for the all-important question: Which price target extreme is more likely to come to fruition? Although Palantir has, technically, achieved Schappel's price target on a brief intra-day basis, history points to a greater likelihood of longtime bear Rishi Jaluria being correct. One of the biggest headwinds for the artificial intelligence revolution is that every game-changing technology/innovation for more than 30 years has navigated its way through a bubble-bursting event. With regularity, investors have overestimated how quickly new technologies will be adopted on a mainstream basis, leading to lofty expectations eventually not being met. The silver lining for Palantir is that Gotham secures multiyear contracts and Foundry is a subscription-driven operating segment. If the AI bubble does burst, as history suggests it will, it's unlikely that Palantir's sales would endure an immediate hit. Nevertheless, sentiment-driven trading would be expected to weigh down companies with exorbitant valuation premiums. The other issue that simply can't be overlooked is valuation. Last summer, Nvidia peaked at a P/S ratio of 42 before rolling over. Likewise, market leaders prior to the bursting of the dot-com bubble topped out at 31 to 43 times sales. Palantir sporting a P/S ratio of roughly 100 in February, or even north of 70 currently, simply isn't sustainable, based on what historical data tell us. Furthermore, the S&P 500's Shiller price-to-earnings ratio hit its third-highest multiple during a continuous bull market in December. Extended valuations of this magnitude have typically been a harbinger of downside for the stock market. While a valuation premium is warranted for Palantir, its stock could easily lose half of its value and still be priced aggressively for future growth.

Despite Its Recent Addition to the S&P 100, This Artificial Intelligence (AI) Growth Stock Is Trading 28% Below All-Time Highs. Time to Buy the Dip?

Last year, shares of artificial intelligence (AI) software company Palantir Technologies (PLTR 3.35%) went parabolic -- soaring by 340%, which made the company the top-performing stock in the S&P 500. In addition to this feat, Palantir was added to the Nasdaq-100 toward the end of 2024. Up until mid-February, Palantir stock appeared to be carrying its momentum from last year into 2025. At one point, shares were up by 65% -- trading for around $125 per share. But over the last month, the stock has entered a downward spiral. As of this writing (March 27), Palantir stock is trading 28% below its prior all-time highs. The ongoing sell-off comes at a time when Palantir just earned inclusion into another exclusive club, the S&P 100. Let's dig into what is driving investors to flee Palantir stock right now. More importantly, I'll explore Palantir's valuation trends to help assess if now is a good opportunity to scoop up some shares. Why is Palantir stock selling off right now? In my eyes, Palantir stock is selling off for two major reasons. First, investors have become wary of how President Donald Trump's new tariffs could impact economic activity. As a result, growth stocks -- particularly in the technology sector -- have been vulnerable to pronounced sell-offs over the last month. As of market close on March 27, the Nasdaq Composite has returned negative 8% on the year. When it comes to business-specific issues, there have been some concerns over whether or not Palantir will be impacted given a new cost reduction initiative at the Pentagon. Palantir works closely with the Department of Defense, and roughly half the company's revenue is concentrated in public sector deal flow. However, as I previously wrote in another piece, Defense Secretary Peter Hegseth's focus on a Software Acquisition Pathway (SWP) strategy at the Pentagon could bode well for Palantir in the long run. In other words, I don't see the budget cuts at the Pentagon as a headwind for Palantir. Is Palantir stock a buy right now? Before honing in on the current price action around Palantir, let's zoom out and look at the bigger picture. Over the last 12 months, Palantir stock is up by 262%. Over the last six months, shares are up by 143%. Even on a year-to-date basis, Palantir stock boasts a gain of 19%. My point here is that even though shares of Palantir have dropped considerably from all-time highs, the stock is still enjoying a fair bit of momentum. These dynamics become even more clear when benchmarking Palantir against its peers in the software arena. PLTR PS Ratio data by YCharts As the chart above illustrates, Palantir is the most expensive name in this cohort of growth software stocks by a mile. Even with heavy selling, the company's price-to-sales (P/S) ratio has expanded considerably over the last year. While the stock is pricey compared to peers, I do see now as an interesting opportunity to buy shares of Palantir on a rare dip. While Palantir's price action could very well continue to exhibit some volatility in the short run, I think the long-term narrative remains strong. The company has a number of strategic alliances that could bode well for long-term growth. Moreover, secular tailwinds fueling rising demand for AI enterprise software platforms represents another compelling catalyst for Palantir. I think the most prudent strategy is to use dollar-cost averaging over a long period of time (i.e., years or decades) when it comes to Palantir stock.

Palantir Stock Fell Nearly 40% From Its High. History Says This Will Happen Next. | The Motley Fool

Palantir Technologies (PLTR -11.49%) was one of the hottest artificial intelligence (AI) stocks on the market in 2024. In fact, with shares soaring 340%, it was the top-performing member of the S&P 500 (SNPINDEX: ^GSPC) last year. The stock initially maintained its upward trajectory in 2025. It climbed another 65% to peak at $125 per share on Feb. 18. But it finally stalled as investors contemplated possible defense budget cuts and the growing risk that tariffs could push the U.S. economy into a recession. In March, Palantir stock fell nearly 40% from its February high, and the share price is still 33% below that level. But the stock fell even further once before, and that incident provides some reassurance for investors: History says Palantir will eventually recoup its losses. Palantir peaked at $39 per share in early 2021 as investors became overconfident. The government was spending trillions of dollars on stimulus programs to keep the economy afloat during the pandemic, and the Federal Reserve was holding interest rates near zero based on the assumption that inflation was transitory. In reality, stimulus checks combined with supply chain disruptions led to the most severe inflation since the 1980s. When the Federal Reserve finally intervened, policymakers were forced to raise interest rates at the most aggressive pace in decades. That sent the S&P 500 into a bear market, and Palantir stock dropped 85% by December 2022 due to a series of disappointing financial results. However, Palantir shares soared as the S&P 500 recovered. The stock not only blew past its previous record high in October 2024 but also returned 1,200% during the two-year period following its trough in December 2022. Put differently, Palantir rewarded investors who purchased shares at the bottom with 13-fold returns over a very short time period. However, that does not necessarily mean Palantir is a smart investment today. Read on to learn more. Palantir designs data analytics software for commercial organizations and government agencies. Its core platforms, Gotham and Foundry, let users integrate and make sense of complex information. And its artificial intelligence platform, AIP, adds support for natural language processing, which lets users engage the software conversationally. Palantir says its key differentiator is an ontology-based software architecture. Allow me to elaborate: Its products are built on a framework (called an ontology) that links digital data to real-world objects. Users can parse that information with machine learning models and other analytical tools to surface insights that improve decision-making. CEO Alex Karp recently told analysts, "We are differentiated because in order to actually make AI work, you need an ontology. No one has an ontology." Palantir reported impressive fourth-quarter financial results. Customers increased 43% to 711, and the average spend per existing customer climbed 20%. In turn, revenue jumped 36% to $828 million, the sixth consecutive acceleration, and non-GAAP (generally accepted accounting principles) net income rose 75% to $0.14 per diluted share. The company also guided for 36% revenue growth in the first quarter. Palantir is well positioned to maintain that momentum. Forrester Research recently recognized the company as a leader in artificial intelligence and machine learning platforms. "Palantir is quietly becoming one of the largest players in this market," wrote analyst Mike Gualtieri. The International Data Corp. estimates AI platform sales will increase by 40% annually through 2028. Palantir achieved a peak price-to-sales (P/S) ratio of 106 in February. Several Wall Street analysts had expressed concerns about its valuation in the preceding months, but many investors ignored the warnings as the stock plowed higher. My own research turned up some interesting information. I reviewed the valuations of over 50 software stocks from the last decade, and only six others achieved a P/S multiple over 100. All six eventually fell at least 73%, and the average peak-to-trough decline was 80%. If Palantir follows that trajectory, its price will drop 80% from its February high near $125 per share. That implies a price of $25 per share. Of course, past performance is never a guarantee of future results, but Palantir still has a valuation problem. The stock trades at 72 times sales, nearly triple its historical average of 25 times sales. Palantir is an excellent business, but investors should be cautious about buying shares today. The stock is not necessarily cheap just because it is currently down 33% from its record high.

This Artificial Intelligence (AI) Powerhouse Is Up 274% in 12 Months. But Is It a Buy? | The Motley Fool

This AI darling is seeing its massive gains unwind amid the market volatility. The market is suddenly on shaky ground. But sometimes, the mind lets recent events outshine the big picture. Take Palantir Technologies (PLTR -11.49%), for example. The powerhouse artificial intelligence (AI) stock has quickly plunged over 30% from its high. Yet, the stock is still up a remarkable 274% over the past year! In other words, things aren't as painful as they might feel. Of course, that was the past. Potential investors must now look forward to gauge whether this stock is a buy. Should investors buy Palantir now, or is the stock bound to give up more of its past gains? Here is what you need to know. You've probably heard artificial intelligence (AI) referenced more times than you can count. The hype can get a little ahead of reality whenever there's a new technology, especially one with as much potential as AI. Palantir is a genuinely game-changing AI stock. The company builds custom software applications on its Gotham, Foundry, and AIP technology platforms. These applications use AI, data analytics, and machine learning to produce real-time actionable insights. Palantir helps customers detect fraud, optimize supply chains, coordinate military missions, and do countless other things. Any organization with lots of data could be a potential customer. Palantir's roots are in government; its work with the U.S. military dates back over a decade. Over half of its total revenue still comes from government business. However, Palantir's momentum in the commercial sector has captivated Wall Street. Revenue has continually accelerated since Palantir launched its AIP platform in mid-2023. Palantir ended 2024 with just 382 U.S. commercial customers. There are over 20,000 large corporations in the U.S. alone. Such flexible software and an underpenetrated market create a massive growth runway for the next decade. Additionally, Palantir is financially rock-solid. The business is already GAAP profitable, with a stacked balance sheet boasting $5.2 billion in cash and zero debt. Analysts estimate Palantir will grow earnings per share by an average of 25% annually over the long term. Investors have a lot to like here, and it makes sense that the AI stock rocketed higher in a euphoric market. Here's the thing. As exciting as Palantir's business is, it hasn't kept up with the stock. Palantir's trailing-12-month revenue has grown 40% over the past three years. Meanwhile, earnings per share have increased an impressive 216%. But the stock? Shares have rocketed over 900%, and that includes the recent decline! To put that in perspective, consider the S&P 500 index, which trades at approximately 21 times its earnings estimates. The index has grown by approximately 10% annually over the long term. Sure, Palantir should grow its earnings much faster than that, but the stock trades at a forward P/E ratio of 157. Stock valuations set expectations for companies. A high valuation means the company must clear a high bar to justify it. At over 150 times forward earnings estimates, Palantir's business must knock it out of the park for investors to continue paying that price. Growing earnings by 25% annually is impressive, but I'm skeptical that it justifies the current valuation. Palantir will probably need to do better. The more excessive a stock's valuation, the riskier it becomes. Palantir is one of the most expensive stocks on Wall Street. If the market volatility continues, its high price and previous investment returns will make it a prime candidate for investors selling to lock in profits or avoid risk. Remember, valuations are like gravity. Palantir's valuation will likely weigh on the stock until the price falls or the business grows enough to reset the valuation to a reasonable level. That moment hasn't arrived yet, so investors should avoid Palantir Technologies.

Down 40%, Should You Buy the Dip on Palantir? | The Motley Fool

Palantir Technologies (PLTR 5.36%) has been one of the hottest artificial intelligence (AI) stocks over the past two years, but even it has been caught up in the recent tariff-fueled market sell-off. After a hot start to 2025, the stock is trading down 40% from its all-time highs, but only down about 2% year to date. The question, though, is whether now is the time to buy the dip in the stock. Palantir's business shouldn't see a direct impact from the tariffs. As a software company involved in data gathering, analytics, and AI solutions, it doesn't sell or manufacture any physical goods that would be subject to tariffs. Commercial customers impacted by tariffs could theoretically pull back their spending budgets, which could impact the company. However, the reverse could also be true. The company could see more demand for solutions that can help optimize supply chains to mitigate tariff impacts. Its AI solutions, meanwhile, are also often aimed at creating efficiencies and helping customers reduce costs. Palantir is seeing robust growth in demand from the U.S. commercial sector for its AI platform. Instead of building AI models, the company has instead focused on becoming an AI operating system by concentrating on the application and workflow software layers. This allows it to help customers identify and address real-world problems with AI. As a result, the company saw huge growth in its U.S. commercial customer count last year. However, many of these new customers are still in the proof-of-concept phase. It has a huge revenue growth opportunity as it moves these solutions into production to tackle real-world issues. One of the stated goals of the Trump administration for instituting its tariffs is to bring manufacturing back to the U.S. Palantir offers a manufacturing operating system called Warp Speed that it markets as "The Manufacturing OS for American Re-Industrialization." This would be another opportunity for the company as it could be utilized to get domestic operations up and running quickly and efficiently. Palantir's largest customer, though, is the U.S. government, which represented more than 40% of its revenue in 2024. The current tariffs would not impact the current dynamics here. However, Palantir could see an impact from the Trump administration's mandate for the Department of Defense to cut its budget by 8% a year over the next five years. That's a large spending cut and Palantir is very tied to the DoD. That said, it is still unclear whether the current Department of Government Efficiency (DOGE) initiatives would negatively or positively impact the company. Spending going down could be a negative, but given that its AI solutions can create efficiencies and potentially lower costs, Palantir could also be a DOGE beneficiary. Despite the big drop in Palantir's stock price, it still trades at a very hefty valuation. The stock has a forward price-to-sales (P/S) multiple of 46 times based on 2025 analyst estimates and 36 times 2026 estimates. Its forward P/S multiple is still double the peak multiples that software-as-a-service (SaaS) stocks traded at in 2021 with similar growth rates. That said, you can still see the ingredients that could propel Palantir to become one of the most valuable companies in the world over the long term. The company takes a unique approach to AI that makes it very intriguing. Owning the operating system to smartphones and PCs has propelled companies like Apple and Microsoft to become two of the largest companies in the world. Owning the AI operating system could do the same for Palantir. Given the stock's valuation, it still can't afford many missteps and must continue to show very strong revenue growth to justify its current valuation. However, this is a stock you really want to own if the valuation continues to come down. As such, investors can look to take a small position while waiting to see if a better buying opportunity arises with the market currently under pressure.

Why Palantir Stock Is Soaring Today

Shares of Palantir (PLTR 1.86%) are surging on Tuesday. The stock gained 1.7% as of 1:30 p.m. ET but was up as much as 10.6% earlier in the day. The rise comes as the S&P 500 gained 1.4% and the Nasdaq Composite saw significant volatility. President Donald Trump's pledge of a historic trillion-dollar defense budget is fueling investor enthusiasm for the government-focused AI company and defense contractor. Trump wants $1 trillion for defense Palantir shares jumped after President Donald Trump and Defense Secretary Pete Hegseth announced plans for a first-ever $1 trillion Department of Defense budget. During a press event on Monday, Trump stated the upcoming budget would be "in the vicinity" of $1 trillion. That's a big jump from the $892 billion Congress allocated this year. Defense Secretary Hegseth was even more explicit, posting on X that "COMING SOON: the first TRILLION dollar @DeptofDefense budget," adding that they "intend to spend every taxpayer dollar wisely -- on lethality and readiness." Palantir could benefit While Palantir has significant commercial operations, a major contributor to its bottom line is the U.S. DOD. The news that the DOD budget would not see its budget cut -- as Trump had indicated earlier this year -- but would actually grow could mean more contracts for Palantir and other contractors. Still, shares of Palantir -- even after a 35% decline over the past few months -- are trading at an insane multiple. Its price-to-earnings ratio is still above 400. That is absurdly high and anything less than perfection from the company will spell trouble for investors.

The Nasdaq Plunged 10% While Palantir Soared In Q1. Here's Why. | The Motley Fool

The artificial intelligence (AI) company's stock was propelled by optimism in regard to a new administration, the release of another monster earnings report showing continued momentum, as well as a slew of new client announcements. In February, Palantir released its Q4 numbers, beating already high expectations from Wall Street. The company posted earnings per share (EPS) of $0.14 cents on sales of $828 million. Consensus estimates were 11 cents per share on $776 million in sales. Palantir's 36% year-over-year growth impressed investors, showing continued strong momentum. CEO Alex Karp echoed this optimism, saying, "Our business results continue to astound, demonstrating our deepening position at the center of the AI revolution." The impressive sales growth was in large part driven by Palantir's equally impressive customer-count growth. The company's total client list grew 43% year over year and 13% quarter over quarter. It seems to be continuing, as the first quarter saw Palantir announce partnerships with a diverse set of new clients from banks to environmental technology companies to manufacturers looking to onshore operations in the U.S. Much of Palantir's gain in Q1 was driven by investor sentiment following the election of Donald Trump. Investors believe the new administration will be favorable for companies like Palantir and that it could win new contracts, especially uberlucrative defense contracts. However, despite the initial optimism and the stock's 11.6% gain by the end of Q1, it was up more than 65% earlier in the quarter. The stock began falling as it was announced the Trump administration would seek extensive cuts at the Pentagon in late February, deflating investors' hopes. Shares of Palantir are down 36.1% since its peak on Feb. 18. Now, however, optimism may have returned as Trump seems to have reversed course, announcing he would seek a record budget for the Department of Defense (DOD). The movements over the last few months highlight just how volatile the stock can be. That's in large part because it carries a hefty premium, to put it lightly. Its current price-to-earnings (P/E) ratio is north of 400 -- an astronomical figure. I would avoid Palantir for now; its stock is just too expensive.

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

Let's look at which stock is the better investment option for investors right now. Palantir and Nvidia have two very different businesses, but both have been big AI winners. Nvidia is a semiconductor company that makes graphic processing units (GPUs). Its chips have become the backbone of AI infrastructure due to their fast processing speeds, which have proven ideal for training AI models and running inference. The company has created a wide moat through its CUDA software platform, which it developed way back in 2006 to allow its chips to be programmed for various purposes. Today, it has built on top of this program to have leading libraries and services designed for AI, which makes its chips so desirable. Palantir, on the other hand, is a software analytics company. It initially made a name for itself in the government space, where its data gathering and analytics capabilities were used for mission-critical tasks such as fighting terrorism. However, with the advent of its AI platform, it has transformed into an AI operating system company that helps customers design and deploy AI solutions for various use cases. Both companies have been seeing strong growth. Nvidia's revenue has more than doubled each of the past two years as large tech companies and AI start-ups race to build out AI infrastructure. Spending for AI infrastructure continues to rise, led by the big three cloud computing companies, which combined plan to spend a whopping $250 billion on capital expenditures (capex) this year related to building out their AI infrastructure. For its part, Nvidia has predicted that overall data center-related capex will rise to over $1 trillion by 2028. Palantir, meanwhile, has seen accelerating growth as commercial customers flock to its AI platform and the federal government starts to embrace AI. Overall revenue growth climbed 36% last quarter, while U.S. commercial revenue soared 64%, and U.S. government revenue jumped 45%. Its customer count has grown 43% as the company attracts new commercial customers through its AI bootcamps. Thus far, many of its commercial customers are still in the proof-of-concept phase. So, Palantir has a big opportunity as it moves these customers' solutions into production to tackle real-world problems. When it comes to risks, the biggest for Nvidia is a slowdown in AI infrastructure spending. The company's CUDA software platform is free, so it doesn't have a big recurring revenue stream. Instead, it must sell more and more chips to continue to grow. While AI infrastructure spending is still on the rise, there are some concerns that the pace of this spending will eventually slow. It has been reported that Microsoft, which is Nvidia's largest customer, has pulled back on some data center projects, as it thinks there could be an overcapacity of supply versus demand. However, analysts at TD Cowen have noted that cloud computing rivals Alphabet and Amazon have stepped in to backfill this capacity. As long as companies continue to race to build out better AI models, they will need more computing power, which tends to be supplied by GPUs. In fact, as models have advanced, they have tended to need exponentially more AI chips to be trained on. For example, the newest models from both Meta Platforms and xAI have been trained on about 10 times as many GPUs as their prior versions. Palantir, meanwhile, faces a potential risk related to the current budget cuts from the U.S. government, which is its largest customer, accounting for more than 40% of its revenue last year. The company is particularly tied to the Department of Defense (DOD) and military-related spending. As part of Department of Government Efficiency (DOGE), the Trump administration has asked the DOD to reduce its budget by 8% annually over the next five years. That's a huge cut to the DOD's budget, which will impact a lot of programs. How much or how little it impacts Palantir or its growth opportunities is still unknown. Palantir CEO Alex Karp has publicly stated that he supports DOGE and has hinted that the company could benefit. However, he and other company insiders have also been dumping Palantir stock. Still, it is certainly possible that if Palantir's AI platform can show that it improves efficiency and helps lower costs, it could be a DOGE winner. One of the big differences between Nvidia's and Palantir's stocks is their valuations. At the time of this writing, Nvidia's shares are quite cheap, with the stock trading at a forward price-to-earnings (P/E) ratio of around 24 times based on this year's analyst estimates, with a price/earnings-to-growth (PEG) ratio of just over 0.4. Stocks with PEG ratios below 1 are typically considered undervalued, making Nvidia a nice bargain according to this metric. Palantir's stock, on the other hand, is quite expensive. The stock trades at a forward price-to-sales (P/S) multiple of 53, which is more than double the peak multiples that software-as-a-service (SaaS) stocks traded at in 2021 with similar growth rates. Note that with Nvidia's stock, we are looking at its valuation based on earnings, while with Palantir's stock, we are looking at its valuation based on revenue, so the difference is pretty huge. Given their recurring revenue models, software companies should trade at much higher valuations than semiconductor companies. However, the valuation difference between the two companies is still quite stark. Both companies have potential growth drivers and potential risks. As such, I prefer Nvidia at the moment, which is just the much bigger bargain if AI infrastructure spending continues to grow.

Why Shares of Palantir Are Trading Higher Today | The Motley Fool

Shares of the artificial intelligence (AI) decision-making company Palantir Technologies (PLTR 4.34%) traded roughly 7.4% higher, as of 11:27 p.m. ET today. There was no clear company-specific reason behind the move, but shares seemed to be rallying along with the broader market in hopes of some reprieve from tariffs. After markets got crushed between Thursday and Monday, investors are finally catching a break with a broader market rally today in hopes that President Donald Trump and his administration will strike trade deals with other countries and avoid having to implement the steep tariffs announced last week. No stock has been spared from the fall. Compared to many other stocks, Palantir has held up quite well this year, with its stock up 12%. The stock still trades at a sky-high valuation, and Palantir has also managed to shake off concerns about spending cuts to the U.S. Department of Defense's budget, which could impact the company because it does a lot of work with the U.S. government in the defense space. Still, the Trump administration does seem supportive of innovative AI companies. In a fact sheet issued yesterday, the White House stated, "The Executive Branch is shifting to a forward-leaning, pro-innovation and pro competition mindset...Agencies will empower AI leaders to remove barriers to AI innovation." While Palantir stock is still down from late February, it has proven remarkably resilient this year in the face of many challenges that began prior to Trump's tariff announcement. This has happened while Palantir trades at 139 times forward earnings. That's a bit rich for my taste, but for some, it may be a dip-buying opportunity. If you do decide to buy, prepare for the stock to be volatile, and take a long-term approach.

1 Artificial Intelligence (AI) Growth Stock That Could Soar Thanks to Trump's Tariffs | The Motley Fool

Artificial intelligence stocks are sinking amid uncertainty around tariff policies. It's a tough time to be an investor right now. New tariff policies from the Trump administration have investors rattled, and the declines seen across the S&P 500 and Nasdaq Composite are becoming more disorienting by the day. As of this writing (April 7), the Nasdaq has dropped by 20% this year while the S&P 500 is down by 14%. Technology companies have been some of the hardest-hit stocks during the sell-off. In particular, once-hot names in the artificial intelligence (AI) sector have become ice cold in just a matter of days. As a contrarian who primarily invests in the technology sector, I've recently been asking myself, "Are there any technology companies that could actually benefit from Trump's taxes?" I've been giving a lot of thought to software companies in particular. Many software businesses do not import or export physical goods, and so for the most part, tariffs shouldn't hurt their business in a direct way. While this logic opens the door to a number of interesting opportunities in the software realm, I'm honing in on one specific name. I contend that Trump's tariffs could serve as an unlikely tailwind for data analytics platform Palantir Technologies (PLTR -0.62%). Could Palantir be a hidden gem amid the market turmoil? Let's dig in and find out. Tariffs are taxes placed on imports and exports. While they are generally assessed on certain products or industries, the Trump administration's tariffs take aim at all goods coming from individual countries. This will likely have significant repercussions on global trade and the prices consumers pay for all sorts of goods. With that in mind, it's natural to wonder how businesses can plan for tariffs and the effects they may have on supply chains, vendor sourcing, and pricing strategies. This is where Palantir can help. By leveraging the company's Foundry and Artificial Intelligence Platform (AIP) suites, companies can leverage their various datasets to build detailed ontologies. Palantir describes an ontology as a "knowledge scaffolding" -- essentially a synthesized digital mapping of a company's data and processes. In essence, these ontologies can help business leaders build dynamic models that show in real time how tariffs impact costs and profit margins. Taking this a step further, Palantir's AI programs can help decision-makers with important next-step processes such as identifying alternative suppliers and building new production timelines, which are important factors when considering how delivery logistics and pricing strategies could fluctuate. I see the tariff use case as more of an opportunity for Palantir to get its foot in the door with more potential customers. In other words, Palantir's use cases span far more than just financial planning around tariff policy. The company's products are deployed across industries such as healthcare, aviation, energy, defense, and more. Given tariffs present challenges for businesses across all industries around the globe, Palantir has a unique chance to showcase its AI software platforms and use this moment as a means to acquire new business as corporations scramble to figure out a game plan that factors in these new policies. The chart below illustrates trends in Palantir's price-to-sales (P/S) ratio over the last year. While the company's current P/S of 66 is about 37% off prior highs seen earlier this year, Palantir still trades at a significant premium compared to its 12-month average P/S multiple. Palantir stock isn't necessarily trading at a bargain, but the ongoing tech sell-off has certainly led to some degree of normalization in the company's valuation. While Palantir stock is on sale right now, the stock still isn't cheap -- the trends above underscore the significant valuation expansion the company has experienced over the last year. I am cautiously optimistic that Palantir could shock investors throughout the year by showcasing its ability to sell a leading suite of AI-powered software tools during an otherwise turbulent economic period. For this reason, I think now is an opportunity to use dollar-cost averaging in this pricey growth stock with the intention to hold for the long term.