Palantir Faces Competition from AMD and Adobe in AI Market
Palantir Technologies (NASDAQ: PLTR) has emerged as a significant player in the artificial intelligence (AI) sector, yet its stock has seen a decline of 30% from its peak. As the market adjusts, concerns grow that other companies may surpass Palantir in market capitalization by year-end.
Specifically, Advanced Micro Devices (NASDAQ: AMD) and Adobe (NASDAQ: ADBE) have displayed stronger financial metrics, yet their stock prices remain lower than Palantir’s, which raises questions about valuations.
Exposure to the AI Arms Race
Palantir’s allure as an investment stems from its long-standing relationships with both commercial and governmental clients. The company’s AI-driven data analytics software has secured critical contracts that contribute to sustainable income generation within the AI field.
Conversely, AMD plays a crucial role in supplying components for data centers, including the graphics processing units (GPUs) that power many AI applications. While AMD trails behind Nvidia in the GPU market, it remains a growing and competitive option.
Meanwhile, Adobe sets the benchmark in graphic design software. Although concerns arose regarding potential competition from free AI image generation tools, Adobe successfully adapted by launching its own solution, Firefly, and continues to report robust growth.
While investors have shown enthusiasm for Palantir’s stock, they remain cautious about AMD and Adobe. Nevertheless, both companies consistently demonstrate strong quarterly growth, raising the likelihood that they may eventually exceed Palantir’s valuation.
Palantir’s Valuation Challenges
Currently, Palantir’s market capitalization stands at approximately $200 billion, compared to AMD’s $172 billion and Adobe’s $169 billion. Despite Palantir’s larger market cap, detailed revenue and profit analysis suggests a dissonance in its valuation.
PLTR Revenue (TTM) data by YCharts
Both AMD and Adobe report higher profit levels than Palantir. However, Palantir’s growth rate is promising. Yet, for Palantir to match Adobe’s profitability, it would need to sustain substantial growth. For instance, if Palantir grows revenues at 40% for the next six years, it could eventually achieve $21.6 billion in revenue, equating to $6.5 billion in profits—an ambitious target that raises questions about current valuations.
PLTR Operating Revenue (Quarterly YoY Growth) data by YCharts
Given the significant gap in profitability between Palantir and Adobe, the current higher valuation of Palantir appears unjustified. Similar reasoning applies to AMD, which, despite its own challenges, has a growing revenue and profit base.
| Company | 2025 Projected Revenue Growth | 2026 Projected Revenue Growth |
|---|---|---|
| Palantir | 32% | 27% |
| AMD | 23% | 21% |
Data source: Yahoo! Finance.
Ultimately, while Palantir retains a growth advantage over AMD, the latter’s revenue and profit metrics pose a challenge to Palantir’s higher valuation, prompting questions about future adjustments in the market.
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Keithen Drury has positions in Adobe and Nvidia. The Motley Fool has positions in and recommends Adobe, Advanced Micro Devices, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
The views expressed in this article represent those of the author and do not necessarily mirror those of Nasdaq, Inc.
