AI Titans Nvidia and Palantir: Which Stock is the Smartest Buy?
Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR) stand out as early frontrunners in the booming artificial intelligence (AI) sector. Their impressive stock performances in 2023—Nvidia with a 171% increase, earning it the top spot in the Dow Jones Industrial Average, while Palantir grew by 340%, leading the S&P 500—underscore their prowess. As of 2024, both companies have been invited to join these indexes, indicating their significant impact on the economy.
Both tech giants have reported record earnings, fueled by surging demand from AI-focused customers. With the current $200 billion AI market expected to expand to over $1 trillion, there is substantial potential for further growth. This prospect positions both companies as attractive investments. However, if you had to choose just one, which would offer a more compelling opportunity? Let’s delve deeper.
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Why Nvidia Could Be the Better Buy
Nvidia is synonymous with AI; the company has established itself as a leader in the field. It is the top seller of graphics processing units (GPUs), which are crucial for tasks like training AI models. Beyond hardware, Nvidia provides a broad range of AI solutions, making it a one-stop provider for businesses diving into AI.
Major tech entities like Meta Platforms and Microsoft rely on Nvidia’s products for their AI initiatives. With high demand exceeding supply for its latest chipset, the Blackwell architecture, Nvidia expects substantial revenue—potentially in the billions—once this product hits the market.
Nvidia has consistently outperformed earnings expectations, showcasing double- and triple-digit revenue growth. Investors are keenly awaiting the company’s latest earnings announcement on February 26, which could further influence its stock performance.
Palantir’s Growing Influence
Palantir specializes in software that aids businesses in data management and decision-making. Once heavily tied to government contracts, it is now seeing robust growth from commercial clients.
A notable advancement from Palantir is its new AI Platform (AIP), launched in 2023. This product utilizes large language models to help clients streamline processes. A recent example includes a global insurance firm that reduced its underwriting process from two weeks to just three hours using AIP, further extending its contract by $11 million as a result.
This innovative growth has led Palantir’s revenues to rise significantly, with U.S. commercial revenue expected to soar by at least 54% in 2024, exceeding $1 billion.
Nvidia or Palantir: Which Stock Should You Choose?
Both firms are poised for continued growth in the evolving AI landscape. Demand for Nvidia’s GPUs is likely to remain robust as the AI infrastructure develops. Additionally, Nvidia’s diverse product portfolio positions it well for future advancements in AI.
Palantir, on the other hand, is positioned to help companies leverage AI effectively, leading to more efficient operations and possibly groundbreaking insights. Many clients are already recognizing the benefits, resulting in increased commitments to Palantir’s solutions.
Deciding between Nvidia and Palantir is indeed challenging. However, examining valuation provides clarity. Nvidia’s forward price-to-earnings ratio is now at its lowest in a year.
PLTR PE Ratio (Forward) data by YCharts
Currently, Nvidia trades at 26 times its estimated future earnings, a stark contrast to Palantir, which sits at 171. This lower valuation for Nvidia, combined with its potential for significant growth, suggests a compelling opportunity for investors. Thus, while both companies are strong investments, Nvidia appears to be the more attractive choice at this moment.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook, is a member of The Motley Fool’s board. Adria Cimino has no stake in the stocks mentioned. The Motley Fool holds positions in and recommends Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool also recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. For more information, please refer to the disclosure policy on The Motley Fool website.
The views expressed in this article are solely those of the author and do not reflect the opinions of Nasdaq, Inc.
