Palantir vs Nvidia: Wall Street's Divergent Views on AI Stock Leaders

Nvidia Stock vs. Palantir Stock: Wall Street Billionaires Buy One and Sell the Other | The Motley Fool

Nvidia (NVDA 3.10%) and Palantir Technologies (PLTR 3.65%) have recently been two of the hottest stocks on Wall Street because both companies play a key role in the artificial intelligence economy. However, the hedge fund billionaires listed below bought Nvidia and sold Palantir in the third quarter. As of December 2023, Citadel and D.E. Shaw were the two most profitable hedge funds in history as measured by net gains since inception. That makes both hedge funds good sources of inspiration. However, the trades listed above were made during the third quarter, which ended in September. Here is a more current look at Nvidia and Palantir. Nvidia reported solid financial results in the third quarter of fiscal 2025 (ended in October), beating estimates on the top and bottom lines. Sales increased 94% to $35 billion and non-GAAP earnings more than doubled to $0.81 per diluted share. That was the sixth consecutive quarter in which Nvidia reported triple-digit earnings growth. Going forward, Wall Street expects Nvidia's adjusted earnings to increase at 39% annually through fiscal 2027, which ends in January 2027. That makes the current valuation of 52 times adjusted earnings look reasonable. Moreover, that consensus may underestimate the company's earnings growth in the coming years because of underappreciated opportunities in Blackwell GPUs and autonomous robotics. To elaborate, Nvidia GPUs are the industry standard in accelerating complex data center tasks such as running artificial intelligence (AI) applications. Blackwell GPUs deliver up to four times faster AI training and 30 times faster AI inference versus the previous Hopper architecture. The Blackwell production ramp began during the fourth quarter of fiscal 2025 and will continue into fiscal 2026. The Wall Street consensus calls for revenue to reach $197 billion in fiscal 2026, implying 52% growth versus fiscal 2025. But Beth Kindig at the I/O Fund thinks Blackwell sales alone could top $200 billion in fiscal 2026. That means Nvidia could crush the consensus sales and earnings estimates when adjacent products like networking equipment and software services are included. Dan Ives at Wedbush Securities shares that opinion. In fact, he believes Wall Street is underestimating Nvidia's earnings growth by as much as 30% in the next few years. Ives attributes part of that discrepancy to Blackwell sales estimates being too low, but he also sees an overlooked $1 trillion opportunity in autonomous driving and robotics. Here is the bottom line: Nvidia shares currently trade at an attractive price, but the stock may look downright cheap in hindsight if earnings increase faster than Wall Street anticipates. So, investors with a time horizon of at least three to five years should feel confident buying a small position today. Palantir reported third-quarter financial results that beat expectations. Its customer count climbed 39% to 629, and the average existing customer spent 18% more over the past year. In turn, revenue increased 30% to $725 million, the fifth straight acceleration, and non-GAAP net income rose 42% to $0.10 per diluted share. The company also raised its full-year guidance, such that sales are projected to grow 26% in the fourth quarter. Wall Street anticipated 22% growth. Management attributed its beat-and-raise performance to tremendous demand for its artificial intelligence platform, called AIP, a product that has supercharged the business since its launch in April 2023. "The world is in the midst of a U.S.-driven AI revolution that is reshaping industries and economies, and we are at the center of it," commented CEO Alex Karp in his latest shareholder letter. "The growth of our business is accelerating, and our financial performance is exceeding expectations as we meet an unwavering demand for the most advanced artificial intelligence technologies from our U.S. government and commercial customers." Importantly, Palantir ranks second behind Microsoft in AI platform software market share, according to the International Data Corporation. That sets the company up for strong growth because spending on AI platforms is forecast to grow at 41% annually through 2028. But the stock trades at 205 times adjusted earnings. That multiple is absurd for a company whose earnings are expected to grow at 25% annually through 2027. Here is the bottom line: Palantir is an excellent business, but investors should avoid the stock until the price falls substantially and current shareholders should consider trimming large positions. Among the 23 analysts that follow Palantir, the median 12-month target is $39 per share. That implies 45% downside from the current share price of $71. I would feel comfortable buying the stock around its consensus target.

Prediction: These 2 Artificial Intelligence (AI) Stocks Could Be Worth More Than Palantir by 2030 | The Motley Fool

Palantir (PLTR 3.65%) has gained a reputation for being one of the best artificial intelligence (AI) investments, with its stock rising a whopping 320% since the start of 2024. However, looking at its current valuation, one could argue the expectations baked into its price may not necessarily be grounded in the company's fundamentals. Palantir and its AI software, which gives clients the tools they need to help with decision making, has become very popular in the AI space. However, Palantir's growth hasn't been remarkable. In the third quarter, Palantir's revenue rose 30% year over year. While that's strong, it's nearly identical to what Snowflake and CrowdStrike latest quarterly revenue growth has been, at 28% and 29%, respectively. Snowflake's revenue growth was powered by its data cloud software platform that is necessary to store and provide data to AI models. On the other hand, CrowdStrike is a cybersecurity provider that uses AI to help determine what a threat is and what is normal activity. Obviously, from just the latest quarterly results, a true winner can't be established. However, over the last three years, Palantir's cumulative revenue grew just 61%, while Snowflake and CrowdStrike grew revenues by 180% and 158%, respectively. PLTR Revenue (Quarterly) data by YCharts. Snowflake and CrowdStrike clearly have the edge over Palantir in topline growth, and it wouldn't be surprising if Palantir struggles to justifying its current valuation. As anticipated, the three companies are valued at wildly different levels. The market has given Palantir a massive premium over its peers, trading for an unbelievable 61 times trailing 12-month sales at the time of writing, which is why Palantir's market cap is so much larger than its peers. But that price tag doesn't seem normal, given Palantir's growth level -- even after accounting for its profitability (more on that later). PLTR Market Cap data by YCharts. This should be an obvious red flag for Palantir investors, as it's unlikely to be able to maintain that valuation if its growth doesn't accelerate. Still, there are some key reasons why Palantir is better off than CrowdStrike or Snowflake. One key advantage Palantir has over the other two is its profitability. Palantir is solidly profitable and has been so for some time. Snowflake and CrowdStrike haven't been near the profitability levels Palantir has. SNOW Profit Margin (Quarterly) data by YCharts. This certainly gives Palantir an edge, and it accounts for some of the expensive price tag on its stock. After years of being deeply unprofitable (Snowflake) or teetering between the breakeven mark (CrowdStrike), the market may have some skepticism about whether these two can ever get over the hump and produce a solid profit margin like Palantir has. And sometimes the market can change its perception about stocks quickly, catching investors off guard. Having said that, Palantir has set a great example for both companies to follow. In Q2 2022, Palantir's loss margin was a dismal 38%. However, two quarters later, in Q4 2022, Palantir broke even and has steadily improved its profitability since. If either Snowflake or CrowdStrike have a Palantir moment and deliver strong profits, I wouldn't be surprised to see these two outperform Palantir over the next five years. Because over this period, there's a solid chance both companies will turn profitable. Additionally, there's the matter of Palantir's very expensive stock. At the time of this writing, Palantir trades for staggering 359 times trailing earnings. Over the next five years, if Palantir maintains its 30% revenue growth rate and its 20% profit margin, that would value Palantir at 83 times trailing earnings if the stock stays at the same price it is right now. On the other hand, what would happen if Snowflake and CrowdStrike could flip the switch and were profitable like Palantir? At today's stock prices and revenue, if Snowflake and CrowdStrike were currently profitable mirroring Palantir's 20% profit margin, the two would've been trading for only 83 times and 118 times trailing earnings, respectively, right now. While, no doubt, both companies still have a ways to go before reaching Palantir's profit levels, it also shows that they are far cheaper stocks than Palantir is, and with five years' worth of growth ahead of them, it's highly likely they'll catch up in value with Palantir. By 2030, I think that Snowflake and CrowdStrike will be worth far more than Palantir. This should likely occur through a combination of CrowdStrike and Snowflake achieving profitability, and Palantir's valuation falling to a reasonable level. Regardless, if you think Snowflake and CrowdStrike can achieve profitability over the next five years (like I do), they appear as a far better option to buy right now than Palantir.

Palantir Stock Is Down 10% to Start 2025. Time to Buy the Dip on This Explosive AI Stock? | The Motley Fool

After a tremendous 2024, when it rose 340%, Palantir (PLTR 3.65%) hasn't had nearly as great a 2025. To start the year, the stock dipped more than 10%. Given how hot an artificial intelligence (AI) stock Palantir is, many investors might wonder if this dip is a buying opportunity. Palantir is certainly growing quickly and has a fantastic product, but one thing gives me pause as a potential investor. Palantir has been in the AI game longer than most companies. It was founded in May 2003 and was created to provide AI solutions to government clients. That turned out to be a massive success, and the company eventually expanded into the commercial side. Palantir's software essentially takes data in, processes it through a custom-built AI platform for each client, and then displays this information on a dashboard so that those with decision-making authority (be it in the military or at an insurance company) can make the most informed decision possible. That was the original premise of Palantir's software, but its latest product has driven massive demand, especially in the U.S. commercial sector. Palantir's Artificial Intelligence Platform (AIP) gives its users the tools they need to integrate AI models into workflows rather than something that is used on the side. Furthermore, AIP has the ability to integrate AI agents to automate tasks that humans normally do. With many prominent AI CEOs declaring that 2025 will be the year of agentic AI, Palantir is a stock to watch as it is one of the leaders in this space. With a leading product in an important space, it's no wonder Palantir's growth has been solid. In Q3, Palantir's total revenue rose 30% year over year to $726 million. However, the U.S. commercial sector saw faster-than-average growth, with revenue rising 54% year over year to $179 million. Even U.S. government revenue exceeded the mean, as it was up 40% year over year to $320 million. Clearly, the U.S. is outpacing the rest of the globe's demand for AI software, and a key part of the Palantir investment thesis is that the rest of the world will eventually have similar AI demand as the U.S. Still, there's plenty of room to grow in the U.S. While Palantir has reached most of its government clients, it only scratched the surface of its U.S. commercial potential. It only has 321 U.S. commercial clients, so there's clearly room for expansion. There's still a lot of growth left for Palantir, but the stock has one glaring problem. Although all of this growth looks promising, the issue is that it's already baked into the stock price. Let's take the bull case, which might state that Palantir's revenue growth will accelerate to 40% by next year due to capturing international business as well as signing more U.S. commercial clients. If Palantir maintains that 40% growth rate for the next five years alongside its current 20% profit margin, it will produce $14.2 billion in revenue and $2.85 billion in profits. While that's incredible growth, Palantir's stock would trade at 53 times trailing earnings if the stock price did not move from today's levels. For reference, Nvidia , a company that's expected to grow sales by 52% next year, trades for 52 times earnings right now. Wall Street analysts only expect Palantir's revenue to grow by 25% in 2025, so the 40% annual growth for five years is an extremely bold and likely wrong prediction. As a result, even attaining the price-to-earnings (P/E) ratio I outlined above would be incredibly difficult. There's just too much growth baked into the stock right now to justify the price tag, and I wouldn't be surprised if this selling continues. While Palantir will be a massive winner as a company in the AI arms race, there's no way to justify the current price tag with the growth it's delivering.

Is Palantir Stock a Buy in 2025 After Its 340% Gain in 2024? Wall Street Analysts Have a Surprising Answer | The Motley Fool

In fact, only six stocks in the S&P 500 have a higher percentage of sell ratings than Palantir, and the median price target of $39 per share implies a 45% downside from its current price of $71. Note that median refers to the middle value, not the average value. So half of the analysts following Palantir expect the stock to fall by more than 45% in the next 12 months. What makes that especially surprising is that Palantir has already fallen by 16% from its record high in recent weeks. Here's what investors should know. Palantir is a data analytics software company. Its core products, Foundry and Gotham, help businesses integrate complex information, build machine learning models, and query data. Its artificial intelligence platform, AIP, adds support for large language models to Foundry and Gotham, letting clients apply generative AI to their operations. The company has received glowing praise from certain industry analysts. For instance, Forrester Research last year recognized it as a leader in AI/machine learning platforms, awarding AIP a higher score for current capabilities than any other product on the market, including Alphabet's Vertex AI. "Palantir is quietly becoming one of the largest players in this market," its analysts wrote. Similarly, Dresner Advisory Services listed Palantir as one of two top-ranked vendors in its 2024 market study on artificial intelligence, data science, and machine learning software. In that context, the business has compelling growth prospects. The International Data Corporation estimates that AI platform sales will increase at an annualized rate of 41% through 2028. Palantir is executing on that opportunity. The company beat Wall Street's high expectations on the top and bottom lines in the third quarter. Its customer count increased by 39% to 629, and its average existing customer spent 18% more than in the prior-year period. Revenue increased by 30% year over year to $726 million, its fifth consecutive sequential acceleration, and non-GAAP earnings increased 43% to $0.10 per diluted share. "The release of our newest platform, AIP, has transformed our business," wrote CEO Alex Karp in his latest shareholder letter. "The growth of our business is accelerating, and our financial performance is exceeding expectations as we meet an unwavering demand for the most advanced artificial intelligence technologies from our U.S. government and commercial customers." While Palantir has compelling growth prospects from a business perspective, that does not necessarily make the stock a good investment. Indeed, Wall Street thinks Palantir's adjusted earnings will increase by just 31% in the next four quarters. Compared to that consensus estimate, its valuation of 200 times adjusted earnings looks very expensive. For that reason, while Palantir is undoubtedly well positioned to capitalize on growing demand for AI software, investors should avoid the stock until it's trading at a much cheaper valuation. I see very little (if any) upside in the near term from the current share price, and I expect better entry points to present themselves in the future. Having said that, Dan Ives at Wedbush Securities sees significant upside for Palantir over the long run. In fact, he recently told Yahoo Finance that Palantir could be the next Oracle or Salesforce. For context, those software companies currently have market values of $450 billion and $310 billion, respectively, while Palantir is worth $160 billion. In other words, Ives thinks Palantir may double or even triple in value over time. Even so, investors should be cautious with the stock now. Its current valuation is unsustainable. Unless Palantir exceeds Wall Street's earnings estimates by wide margins, the stock could experience a material correction in the coming months.

Where Will Palantir Technologies Be in 3 Years?

Palantir Technologies (PLTR 1.43%) went public in September 2020, and shares of the company that made its name by providing analytics and software platforms to federal government agencies have shot up a remarkable 608% since then as of this writing. The stock has comprehensively beaten the 61% gains clocked by the Nasdaq-100 Technology Sector index over the same period, though it is worth noting that Palantir's red-hot rally gained momentum only from April 2023 after the company announced its arrival into the artificial intelligence (AI) software market. More specifically, Palantir announced the launch of its Artificial Intelligence Platform (AIP) on April 27, 2023. The stock has soared like a rocket since then, logging gains of 760% as of this writing. This red-hot rally has been driven by the massive growth potential of the generative AI software market that Palantir is looking to tap with this product platform. But the question is, does Palantir have enough fuel in the tank to deliver more gains to investors over the next three years considering the expensive valuation it is trading at right now? AIP has supercharged Palantir's growth To understand the impact of AIP on Palantir's business, we will first take a look at how the company was performing before its foray into the AI software platforms space. Palantir launched AIP in the second quarter of 2023, so I'll examine its first-quarter results for that year. The company's revenue in Q1 2023 was up 18% year over year to $525 million. Palantir reported an increase of 15% in its commercial revenue for that quarter, while the growth in its government revenue was 20%. It is also worth noting that Palantir's revenue pipeline wasn't growing solidly at that time. This was evident from the company's remaining deal value of $3.4 billion in Q1 2023, which was down from $3.5 billion in the year-ago period. Palantir points out that the remaining deal value is the "total remaining value of contracts and includes existing contractual obligations and unexercised contract options available to those customers." So, an improvement in this metric ideally boasts of a healthy revenue pipeline, which Palantir was unable to build at that time. Cut to the present, and the rapid adoption of AIP has started bearing fruit for Palantir. Its revenue in the third quarter of 2024 increased 30% year over year to $726 million. The commercial business has started contributing in a more meaningful way for Palantir as this segment's revenue jumped 27% year over year during the quarter. The government business has also received a nice boost as it jumped 33% year over year to $408 million, pointing to the solid demand for its AIP among government customers. Meanwhile, the revenue pipeline has also started improving as Palantir's remaining deal value increased by 22% year over year to $4.5 billion. The growth in this metric can be attributed to Palantir customers signing bigger deals with the company following the introduction of AIP. For example, Palantir signed 64 deals worth $1 million or more in the first quarter of 2023. That number swelled to 104 in the third quarter of 2024. Management has clearly pointed out that AIP is playing a significant role in helping it land more customers and encourage them to spend more on its offerings. On its November earnings conference call, CFO Dave Glazer remarked that AIP is "driving both new customer conversions and existing customer expansions." The good part is that the AI software platforms market that Palantir is targeting with AIP is currently in its early phases of growth. Market research firm IDC is expecting this market to generate $153 billion in revenue in 2028 compared to just $27.9 billion in 2023. The firm expects AI software platforms to grow at an annual rate of close to 41% during this five-year period. As a result, don't be surprised to see Palantir's end market expand rapidly, thereby allowing the company to land more customers and also win a bigger share of their wallets considering that it is among the top providers of AI software platforms. Palantir could be a much bigger company in three years The AI software platforms market generated $27.9 billion in revenue in 2023, as per IDC. Palantir finished that year with a total revenue of $2.23 billion. Of course, Palantir's AI business was in its very early stages at that time since it launched AIP in April 2023, but it is worth noting IDC named the company the No. 1 provider of AI software platforms by both market share and revenue in 2021. So, Palantir was already in the AI game before this technology took off following the arrival of ChatGPT in November 2022. That's not surprising, as CEO Alex Karp wrote during the launch of AIP that this platform "combines the machine learning technologies that we have developed for industrial and military partners with the latest large language models that have recently captured public attention, for customers across the commercial and government sectors." Assuming all of Palantir's 2023 revenue was related to sales of its AI-related software, its share of the AI software platforms market would have stood at 8% at that time. Now that the company's growth is accelerating and the overall AI software platforms market is expected to grow at a tremendous pace through 2028, Palantir seems set for impressive growth. Assuming the company manages to increase its share to even 10% of the AI software platforms market in 2028, its annual revenue could exceed $15 billion (considering that the size of the market is expected to hit $153 billion in 2028 itself). That would translate into an annual growth rate of almost 40% based on the $2.8 billion in revenue that the company is expected to have generated in 2024. Palantir currently has a price-to-sales ratio of 63, which is much higher than its five-year average sales multiple of 16. The potential acceleration in Palantir's growth over the next three years suggests that it can justify its valuation. But even if it trades in line with its five-year average sales multiple, Palantir's market cap in 2028 could hit $240 billion (based on the $15 billion annual revenue estimated in the previous paragraph). That would represent a potential upside of 57% from current levels over the next five years. However, don't be surprised to see this AI stock delivering stronger gains if it manages to corner a bigger share of the AI software platforms market.

Think Palantir Stock Is Expensive? This Chart Might Change Your Mind. | The Motley Fool

Palantir Technologies (PLTR -3.39%) has been one of the hottest stocks in the artificial intelligence (AI) space. The company's early leadership position in AI software systems for businesses and government agencies has helped it post impressive business performance translating into stellar stock returns. The company's share price is up 288% over the last year, even with a significant pullback recently. Palantir now has a market capitalization of roughly $148 billion as of this writing. At the valuation, the company is trading at roughly 136 times this year's expected earnings and 42 times expected sales. With these forward sales and earnings multiples, Palantir already commands a significant valuation premium -- and some very strong future growth is already priced into the stock. But as lofty as the company's current valuation looks by most metrics, there are some signs suggesting Palantir stock could offer substantial upside. And there's one in particular that investors should pay attention to. With its last quarterly report, Palantir's sales increased 30% year over year to $726 million thanks to strong demand for its Artificial Intelligence Platform (AIP) product and other software services. Meanwhile, net income more than doubled to hit roughly $143.5 million. The company's top and bottom line performance were very strong and came in well ahead of Wall Street targets, and an even more encouraging trend has emerged. Take a look at the chart below. Over the trailing-12-month period, Palantir has posted free cash flow (FCF) of $983.3 million on sales of roughly $2.65 billion. That means that the company has recorded a free-cash-flow margin of 37%. That's an impressive FCF margin even in the world of software-as-a-service (SaaS) companies, and it actually looks poised to climb even higher. Palantir's business is highly scalable and still has a huge runway for long-term growth. With a very strong demand outlook and a fantastic margins picture, Palantir stock can still be a big long-term winner.