Better AI Stock: Palantir vs. Nvidia | The Motley Fool (2024)

Palantir (PLTR 3.46%) and Nvidia (NVDA 3.46%) represent two different ways to invest in the growing AI market. Palantir is a data mining and analytics company which mainly serves U.S. government agencies and large enterprise customers. It aggregates data from disparate sources to help those clients make smarter data-driven decisions.

Nvidia is the world's top producer of discrete GPUs. Its chips were once mainly used in PC gaming, but it expanded into the data center market with higher-end GPUs for processing machine learning and AI tasks. It now generates most of its revenue from the data center market, and most of the world's top AI companies -- including Microsoft, OpenAI, and Alphabet's Google -- rely on Nvidia's chips to process their latest AI applications.

Over the past 12 months, Palantir's stock rose nearly 190% as the growth of its commercial business accelerated and its margins expanded. Nvidia's stock rallied more than 220% as the growth of the generative AI market lit a raging fire under its data center business. But should you buy either of these hot AI stocks right now?

Investors should reset their expectations for Palantir

Palantir went public via a direct listing in September 2020. Its stock opened at $10 a share, and eventually quadrupled to a record high of $39 on Jan. 27, 2021. At its peak, it traded at 300 times the adjusted EPS it would generate in 2021.

Palantir's investors were initially impressed by its rosy expectations for at least 30% revenue growth each year through 2025. Its revenue rose 41% in 2021, but grew just 24% in 2022 and 17% in 2023. That slowdown, which the company attributed to choppy government spending and economic headwinds for its commercial business, sank the stock to a record low of $6 in December 2022.

Palantir's stock has nearly quadrupled since then, but it remains more than 40% below its all-time high. The bulls returned as revenue growth stabilized, operating margins expanded, and it turned profitable on a generally accepted accounting principles (GAAP) basis. The company also drummed up some excitement with its rollout of new AI tools over the past year.

For 2024, Palantir expects its revenue to rise 18% to 20%, its adjusted operating margin to expand six percentage points to midpoint of 34%, and to remain firmly profitable on a GAAP basis. Those improvements should be driven by the accelerating growth of its commercial business and the stabilization of its government contracts.

Analysts expect Palantir's adjusted earnings to grow 32% for the full year. Its stock might still seem a bit pricey right now at 68 times forward earnings -- but it looks more reasonably valued than during the meme stock rally in 2021.

But they should maintain their high expectations for Nvidia

Nvidia's stock has only retreated about 8% since it set a new record high of $950.02 on March 25. The bulls continued to buy the chipmaker's stock as the most straightforward play on the AI market -- since the world's top generative AI platforms simply can't process their natural language queries without its GPUs.

In fiscal 2023, which ended last January, Nvidia's revenue stayed flat year over year as its adjusted EPS declined 25%. At the time, the PC market's post-pandemic market slowdown was reducing its sales of gaming GPUs, while the "crypto winter" was driving disenchanted miners to flood the market with secondhand GPUs.

But in fiscal 2024, Nvidia's revenue and adjusted EPS surged 126% and 288%, respectively. Nearly all of that growth was driven by the buying frenzy in data center GPUs for handling AI tasks. For fiscal 2025, analysts expect the company's revenue and adjusted EPS to rise 83% and 91%, respectively, as the market's demand for its new data center chips continues to outstrip available supply. The stabilization of the PC market should also complement that growth as its gaming business recovers.

Nvidia's stock might not seem cheap at 36 times forward earnings, but it's still reasonably valued relative to the growth potential of the generative AI market -- which Fortune Business Insights believes will expand at a compound annual growth rate (CAGR) of 47.5% from 2023 to 2030. Nvidia's first mover's advantage in that market also gives it tremendous pricing power: gross margin rose from 56.9% in fiscal 2023 to 72.7% in fiscal 2024, and could easily expand again in fiscal 2025.

The obvious winner: Nvidia

Palantir's growth is stabilizing, but it faces plenty of competitors in the data analytics market and its stock isn't a screaming bargain yet. Meanwhile, Nvidia's stock is cheaper, it continues to sell the best picks and shovels for the AI gold rush, and it probably won't be overtaken by any of its potential challengers in the foreseeable future. Those core strengths easily make Nvidia the better long-term play on the AI market than Palantir.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Better AI Stock: Palantir vs. Nvidia | The Motley Fool (2024)


Better AI Stock: Palantir vs. Nvidia | The Motley Fool? ›

The obvious winner: Nvidia

What AI stock does Motley Fool recommend? ›

The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing.

Does Motley Fool recommend Palantir? ›

The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services.

What is the top AI stock to buy now? ›

7 best-performing AI stocks
TickerCompanyPerformance (Year)
NVDANVIDIA Corp211.78%
PRCTProcept BioRobotics Corp123.99%
UPSTUpstart Holdings Inc84.67%
AVAVAeroVironment Inc.79.22%
3 more rows
May 9, 2024

Is Palantir still relevant? ›

Palantir Technologies stock is down significantly following the release of its Q1 results. The deceleration of Palantir's U.S. commercial revenue growth seems to have spooked investors. However, the company increased its full-year outlook and is building a robust long-term revenue pipeline.

What AI company did Warren Buffett invest in? ›

Apple. Apple (NASDAQ: AAPL) is by far the biggest AI holding for Buffett. Berkshire Hathaway's stake in the tech giant is worth roughly $156.9 billion. The stock hasn't performed especially well over the last 12 months, though, due to sluggish sales growth.

What is the most successful stock predictor? ›

1. AltIndex – Overall Most Accurate Stock Predictor with Claimed 72% Win Rate. From our research, AltIndex is the most accurate stock predictor to consider today. Unlike other predictor services, AltIndex doesn't rely on manual research or analysis.

What is better than Palantir? ›

Palantir has market share of 1.61% in big-data-analytics market. Palantir competes with 42 competitor tools in big-data-analytics category. The top alternatives for Palantir big-data-analytics tool are Databricks with 15.59%, Azure Databricks with 14.71%, Apache Hadoop with 14.65% market share.

Is Palantir worth holding? ›

Fair Value Estimate for Palantir Stock

With its 2-star rating, we believe Palantir's stock is overvalued compared with our long-term fair value estimate of $16 per share, which implies a 2024 enterprise value/sales multiple of 12 times.

Will Palantir ever be profitable? ›

The company has reported four consecutive quarters of profitability, making it eligible for inclusion in the S&P 500 index. Palantir also that said its private sector revenue grew 70% year-over-year in Q4 2023, and it now has 221 commercial customers, up 55% from 2022 levels.

Which company is number 1 in AI? ›


What is the best AI penny stock to buy? ›

If you're still up for the challenge, these are the AI penny stocks to consider.
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Apr 24, 2024

Is Nvidia a good stock to buy? ›

Nvidia Corp. (NVDA) was a top performer in the quarter gaining 82.5% in the period. While the company has had an impressive run, gaining 242% over the last year, the valuation has been supported by the impressive growth in Revenue (126%), EPS (392%) and free cash flow (610%) over the last year.

Where will Palantir be in 5 years? ›

Considering the points discussed above, it is not surprising to see that analysts expect Palantir to clock annualized earnings growth of 85% over the next five years. If that prediction is borne out, its earnings could rise from 2023's $0.25 per share to $5.42 per share after five years.

Is PLTR a good long-term investment? ›


The latest sell-off could be a lucrative opportunity for long-term investors. Excitement surrounding artificial intelligence (AI) has captivated the investment community with both the S&P 500 and Nasdaq Composite trading near record levels.

Is Amazon using Palantir? ›

We've integrated Palantir Foundry and Amazon SageMaker to allow users to develop, integrate, and operationalize AI that can power the decision making of a modern connected enterprise.

Which is the best AI model for stock prediction? ›

Sentiment Analysis

AI's ability to analyze sentiment in news articles, social media, and financial reports can be a game-changer in predicting stock movements. Natural language processing (NLP) algorithms can assess the sentiment behind news headlines and social media discussions related to specific stocks.

What stocks are in Motley Fool's ownership portfolio? ›

Portfolio Holdings for Motley Fool Asset Management
Company (Ticker)Portfolio WeightChange in Shares
Berkshire Hathaway Inc Cl B Ordinary Shares (BRK.B)3.6+325%
Microsoft Corp Ordinary Shares (MSFT)3.2+7%
Amazon Ordinary Shares (AMZN)3.1+4%
Apple Ordinary Shares (AAPL)2.7+7%
65 more rows

Are there any AI penny stocks? ›

Guardforce AI (NASDAQ:GFAI) is an interesting AI penny stock, which leverages disruptive technology to deliver robust robotics-based security solutions. This unique focus on robotics-based security positions it ahead of its competition and as a frontrunner in the field.

Is there an AI stock picker? ›

At Free AI Stock Picker, our revolutionary AI stock picker uses a type of artificial intelligence (AI) called reinforcement learning (RL) to learn to identify stocks setting up for strong up trends so that you have the same insight as big wall street investors.

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