Celebrating Two Years of AI-Driven Growth: NVIDIA and Palantir Lead the Charge
Chicago, IL – October 17, 2024 – Zacks.com unveils stocks of interest featured in the Analyst Blog. Each day, Zacks Equity Research analysts share insights on the latest news affecting stocks and financial markets. Recent highlights include: NVIDIA Corp. NVDA, Palantir Technologies Inc PLTR, Microsoft Corp. MSFT, Meta Platforms, Inc. META, and Advanced Micro Devices, Inc. AMD.
Here are key updates from Wednesday’s Analyst Blog:
AI Surge Fuels Two-Year Bull Market: Spotlight on NVDA and PLTR
Last week, Wall Street marked the second anniversary of a bull market, with the S&P 500 reaching record highs. Since October 12, 2022, this index has increased by over 60%, bouncing back from a closing low of 3,577.03, according to Dow Jones Market Data.
The ongoing bull market shows little sign of slowing down, primarily due to a strong U.S. economy and the rise of artificial intelligence (AI). The excitement surrounding AI is predicted to elevate the S&P 500 further as we approach year-end and look towards the next year. The widespread adoption of AI is likely to enhance real GDP growth, increase earnings per share (EPS), and positively affect the S&P 500’s valuation.
The staying power of the AI boom stems from its practical applications. Businesses can utilize AI to boost efficiency and cut costs. Notably, NVIDIA Corp. and Palantir Technologies Inc have been at the forefront of this AI revolution.
NVIDIA is renowned for its technology that is crucial for AI applications. The company’s graphic processing units (GPUs) serve as the backbone for servers that train large language models and manage AI operations. Meanwhile, Palantir’s AI software, particularly its Artificial Intelligence Platform (AIP), has found significant traction.
In two years, NVIDIA’s shares have skyrocketed by 1002%, while Palantir’s shares have risen by 433.9%. As their prominence in the AI sector grows, both tech stocks are anticipated to continue climbing.
Reasons for Optimism Around NVIDIA Stock
Although NVIDIA faces challenges from new U.S. chip export caps, the demand for its Blackwell chips is expected to bolster its stock price.
CEO Jensen Huang recently highlighted an “insane” demand for Blackwell chips now in full production. The Blackwell B200 chip boasts greater AI throughput than the existing Hopper H100 chip, attracting interest from major firms like Microsoft Corp. and Meta Platforms, Inc..
NVIDIA’s stronghold on the GPU market—commanding over 80%—also supports its stock growth. The GPU market is projected to balloon to $1,414.39 billion by 2034, up from $75.77 billion this year, according to Precedence Research.
Developers prefer NVIDIA’s CUDA software platform for its efficiency over Advanced Micro Devices, Inc.’s ROCm platform. Consequently, the Zacks Consensus Estimate for NVIDIA’s EPS stands at $2.81, reflecting a 72.4% year-over-year increase.
Positive Momentum Building for PLTR Stock
Palantir, a prominent player in the AI landscape, is benefitting from a strong association with government contracts. The company is recognized for helping government entities streamline data management, thus improving efficiency and cutting costs.
Recently, Palantir’s AIP has drawn interest from commercial clients. In their latest quarterly results, U.S. commercial revenues surged 55% to $159 million, while the customer base in this sector rose by 83% to nearly 300. This is in stark contrast to just 14 commercial customers four years ago.
Moreover, Palantir’s government revenue also saw a 23% increase during the same period. The growing demand for its AIP positions Palantir favorably in the market, especially with the AI sector expected to reach $1 trillion in the next decade. The Zacks Consensus Estimate for PLTR’s EPS is $0.36, marking a 33.3% rise from last year.
Lower Interest Rates Favor NVDA and PLTR
A key factor enhancing the share prices of NVIDIA and Palantir is the recent decision by the Federal Reserve to lower interest rates by 50 basis points. This is the first rate cut in over two years, and more reductions are anticipated as inflation pressures ease.
Lower interest rates benefit technology companies like NVIDIA and Palantir by reducing borrowing costs and increasing profit margins. Moreover, these cuts maintain cash flows crucial for both companies’ growth strategies.
Currently, analysts project a highest short-term price target of $200 for NVDA stock, indicating a potential upside of 44.9% from its last closing price of $138.07. For PLTR, the top target is $50, suggesting a 15.2% increase from its latest close at $43.40.
As of now, NVIDIA has a Zacks Rank #2 (Buy), while Palantir holds a Zacks Rank #3 (Hold). You can view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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