Three Stocks That Could Outperform Palantir Over Five Years
In the past year, Palantir Technologies (NASDAQ: PLTR) has seen a remarkable surge, with its shares more than quadrupling. Furthermore, Palantir’s stock is up over 40% year to date. However, the company may not be among the top long-term investment opportunities compared to others that could yield better returns over the next five years.
1. Intuitive Surgical
Intuitive Surgical (NASDAQ: ISRG) currently has a market cap that is roughly $70 billion less than Palantir’s. Yet, this gap might soon close as Intuitive shows strong growth potential.
While Palantir leads in growth rates, Intuitive Surgical is not far behind. The company reported a 19% year-over-year revenue increase in Q1 2025. This year, it anticipates a 15% to 17% increase in procedure volume for its da Vinci robotic systems.
An important factor is valuation. While Intuitive commands a high forward price-to-earnings ratio of 68, this appears reasonable compared to Palantir’s significantly higher forward earnings multiple of 196.
The future growth outlook for Intuitive Surgical is solid. It performed approximately 2.7 million procedures last year and estimates around 8 million relevant procedures annually. The company’s goal is to tap into 22 million soft-tissue procedures, for which products are already being developed.
Image source: Intuitive Surgical.
2. Alibaba Group
Alibaba Group (NYSE: BABA) is already larger than Palantir by market cap, but projected growth suggests it may increase its lead. Analysts expect Alibaba to widen its gap over Palantir in the coming years.
Valuation contributes significantly to this outlook. Palantir’s astonishingly high forward earnings multiple contrasts sharply with Alibaba’s mere 12.5 times forward earnings. Alibaba’s PEG ratio, based on five-year earnings projections, stands at a competitive 0.71, indicating strong growth relative to its price.
Moreover, demand for artificial intelligence (AI) is expected to benefit Alibaba more than Palantir. Notably, Alibaba’s AI product revenue has soared by triple-digit percentages for six consecutive quarters, and its cloud segment is also gaining from AI advancements.
Potential government intervention remains a concern, which could hinder Alibaba’s growth. However, if it can operate relatively freely, it is likely to surpass Palantir by decade’s end.
3. Alphabet
It’s worth considering why Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) appears on this list, given that it is currently more than seven times larger than Palantir. Despite its size, skepticism about Alphabet presents an opportunity for growth.
Concerns have arisen regarding generative AI posing an “existential threat” to Google Search while the company faces two significant antitrust lawsuits. Some speculate that these lawsuits could lead to a breakup of the company.
Despite this pessimism, confidence in Alphabet’s resilience remains important. The company’s performance suggests that AI is enhancing, rather than hindering, its operations. Google Cloud is thriving as its customers develop generative AI applications, boosting revenue and user engagement.
Though antitrust issues could pose challenges, any resolutions would likely take years. Even if the company faces unfavorable outcomes, the effects might not be as detrimental as anticipated.
Ultimately, over the next five years, I would prefer owning shares of Alphabet rather than Palantir.
Final Thoughts on Investing in Alibaba Group
Before considering an investment in Alibaba Group, it’s essential to note that the Motley Fool analyst team has identified what they believe are the 10 best stocks to buy now—Alibaba did not make this list. The stocks included may produce significant returns in the coming years.
For example, Netflix was on this list on December 17, 2004. If you invested $1,000 at that time, you’d have $617,181!
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*Stock Advisor returns as of May 5, 2025
Suzanne Frey is an executive at Alphabet and a member of The Motley Fool’s board of directors. Keith Speights holds positions in Alphabet and Intuitive Surgical. The Motley Fool has positions in and recommends Alphabet, Intuitive Surgical, and Palantir Technologies. The Motley Fool recommends Alibaba Group. For further details, please refer to the disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
