Exploring Cheaper AI Stocks: Opportunities Beyond Palantir
Palantir Technologies (NASDAQ: PLTR) was one of the standout artificial intelligence (AI) stocks in 2024, driven by increased adoption of its AI Platform among U.S. commercial clients and rising government spending. Growth appears poised to accelerate further as the company transitions many of its early successful pilots into full-scale implementations.
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In light of Palantir’s success, let’s examine three alternative AI stocks that could provide value for investors.
Nvidia: The AI Giant with Room to Grow
Nvidia (NASDAQ: NVDA) has emerged as a significant player in AI, yet its stock is more attractively valued than Palantir’s. With a forward price-to-earnings (P/E) ratio of 32 based on 2025 projections and a price/earnings-to-growth (PEG) ratio of 1, it’s seen as undervalued in the growth stock sector.
Nvidia has greatly benefited from the expanding AI infrastructure, as its graphic processing units (GPUs) are essential for training AI models. Microsoft’s recent announcement of $80 billion in spending on AI data centers underscores the ongoing growth in this sector. To contextualize, that amount exceeds the entire GDP of Panama or Croatia—a clear indication of significant investment in AI infrastructure.
As major tech companies collectively regard AI as a transformative opportunity, we can expect increased spending on AI data centers among other large firms. Nvidia’s commanding 90% market share of the GPU market positions it well for continued success in AI.
Image source: Getty Images.
GitLab: A Cost-Effective AI Stock
GitLab (NASDAQ: GTLB) mirrors Palantir’s growth but is valued significantly lower. The company offers a DevSecOps platform that streamlines software development while enhancing cybersecurity.
Last quarter, GitLab experienced a revenue increase of 31%, marking the sixth consecutive quarter of growth between 30% and 40%. This success is largely driven by GitLab Duo, their suite of AI tools that assist programmers with code automation and suggestions.
GitLab Duo, an extension of its Ultimate and Premier platforms, has led to lucrative new contracts. The company reported strong revenue retention at 124%, along with favorable churn rates. Additionally, GitLab Dedicated has gained traction, providing extra features like data isolation, further fostering demand for Ultimate subscriptions. A recent collaboration with Amazon will facilitate quicker, secure code deployment for AWS users using Ultimate.
Currently trading at a forward price/sales ratio of 10.5 and maintaining over 30% revenue growth, GitLab stands out as an appealing high-growth option.
AppLovin: An AI Powerhouse in Gaming
AppLovin (NASDAQ: APP) has gained even more traction than Palantir over the last year, all while maintaining a reasonable valuation of a forward P/E ratio of 37, supported by a PEG ratio of 0.59.
As an adtech company focusing on video game applications, AppLovin has seen explosive growth due to its AI tool Axon-2, which enhances user targeting capabilities. This predictive tool improves as it gets more data, driving further expansion.
Last quarter, the software platform housing Axon-2 reported a 66% increase in revenue to $891 million, contributing to an overall revenue growth of 39%, reaching $1.2 billion. With a trajectory of 50% growth over the past seven quarters, the company anticipates a 20% to 30% increase in platform revenue from gaming customers as the market continues to grow.
Looking ahead, AppLovin aims to extend Axon-2 into the e-commerce sector, where it has already seen success in preliminary tests. If these efforts pay off, significant upside potential could emerge for the stock.
Should you consider investing in Nvidia?
Before making a decision on Nvidia, it’s worth noting:
The Motley Fool Stock Advisor analysts recently highlighted the 10 best stocks for investors, and Nvidia was not among the selections. The listed stocks hold potential for significant returns in the upcoming years.
Reflect on this fact: If you had invested $1,000 in Nvidia on April 15, 2005, based on their recommendation, you would have seen your investment grow to $858,668!*
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John Mackey, former CEO of Whole Foods Market, part of Amazon, is affiliated with The Motley Fool’s board. Geoffrey Seiler holds positions in GitLab, while The Motley Fool has interests in and endorses Amazon, AppLovin, GitLab, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends options related to Microsoft. A detailed disclosure policy is in place.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
