Palantir vs. Nvidia: Which AI Stock is the Better Buy?

Barchart · 10/16 08:20

The surge in artificial intelligence (AI) technology demand has pushed stocks like Palantir Technologies (PLTR) and Nvidia (NVDA) to impressive heights. Palantir's shares have soared about 145.7% year-to-date, while Nvidia has climbed even higher, with a 167.7% increase.

With both companies playing critical roles in the AI boom, let’s dive into these two tech giants' strengths and growth potential to see which stock might be the better buy right now.

Nvidia: The Engine Powering AI

Nvidia is widely recognized as the backbone of the AI revolution. Its graphics processing units (GPUs) are essential in training and running AI models, making the company a critical player in the AI space.

Its Data Center business, which provides the infrastructure needed for AI workloads, has been on fire. In Q2 2024, Nvidia’s Data Center revenue hit a staggering $26.3 billion—a 154% increase compared to the previous year. It’s worth noting that just two years ago, its Data Center revenue for the same period was only $3.8 billion.

Nvidia’s dominance in AI hardware ensures its long-term growth potential.

Palantir: The AI Software Pioneer

On the other hand, Palantir is an enterprise software company, specializing in data analytics and AI-powered insights. Palantir has seen increasing demand for its AI platform (AIP), especially from U.S. commercial customers. This surge in adoption is expanding Palantir’s customer base and unlocking new opportunities in the enterprise AI market.

While Palantir is a key player in industries like defense, government, and large enterprises, its business model is more niche compared to Nvidia’s expansive hardware reach. Nonetheless, Palantir’s AI tools are becoming increasingly popular, positioning the company for solid growth in the evolving AI landscape.

Comparing the Two: NVDA vs. PLTR

While both companies benefit from AI’s rapid expansion, their business models and market focuses differ significantly. Nvidia’s primary strength is in AI hardware; its GPUs power AI systems across industries. Palantir, on the other hand, excels in AI software, helping enterprises make sense of large datasets and enabling strategic decision-making.

So, for investors seeking a stock positioned to deliver robust growth across a broad range of industries, Nvidia may have the upper hand. Its hardware is essential for AI development, and it’s likely to continue riding the wave of demand for AI infrastructure.

Financial Performance and Profitability

Nvidia’s scale is hard to match. In the first half of fiscal 2025, the company generated $50 billion in revenue, marking an impressive 171% year-over-year growth. Its net income reached $31.5 billion, with earnings per share (EPS) surging 285%. This demonstrates Nvidia’s ability to grow revenue and convert that growth into significant profits.

On the other hand, Palantir delivered revenue of $1.31 billion in the first half of 2024, up 24% year-over-year. While Palantir's revenue growth is impressive, its earnings are still in the early stages of development compared to Nvidia's well-established profitability.

Future Growth Potential

Looking ahead, Nvidia’s future appears bright. Its Data Center business, advancements in next-generation Blackwell chips, and solid demand for its existing Hopper architecture will likely drive continued revenue growth. Nvidia’s strength across other segments, such as gaming and automotive, adds another layer of resilience to its financial outlook.

Conversely, Palantir is benefiting from strong demand in its U.S. government and commercial sectors. Its AIP platform is gaining traction, and the company’s large contracts should continue to boost revenue. However, Nvidia’s growth potential, fueled by its infrastructure dominance, is expected to outpace Palantir’s by a wide margin.

Valuation: The Premium Price Tag

Both Nvidia and Palantir trade at premium valuations. However, due to its strong profitability, Nvidia’s forward price-to-earnings (P/E) ratio is notably lower than Palantir’s.

Nvidia trades at 37 times its estimated fiscal 2026 earnings of $3.53, while Palantir trades at a much higher 163 times its estimated 2025 earnings of $0.26. Further, Palantir stock is also trading at a significant premium compared to its peer group average.

Palantir’s high multiple may signal limited upside potential, especially compared to Nvidia’s more moderate valuation, market leadership in AI, and solid profitability.

What Analysts Recommend for PLTR and Nvidia Stocks

Wall Street analysts are cautious on Palantir stock, which has a “Hold” consensus rating. Further, analysts’ average price target of $26.71 indicates expected downside from current levels.

At the same time, Wall Street is bullish on Nvidia stock, which sports a “Strong Buy” consensus rating. Further, analysts’ average price target of $150.36 implies a decent upside potential from current levels.

The Bottom Line: Which Stock Should You Buy?

If you’re looking for a low-risk, high-growth stock with established market leadership and strong profitability in the AI space, Nvidia is the safer bet. Its dominance in AI hardware, diversified revenue streams, and proven ability to generate profits make it an attractive choice for long-term investors.

For those willing to take on more risk, Palantir offers exposure to a fast-growing enterprise AI market. However, its high valuation and relatively early-stage profitability mean it could be a more volatile investment.

More Stock Market News from Barchart

On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.