Consulting firm PwC estimates that AI will contribute more than $15 trillion to the global economy by 2030. Investors hoping to benefit are looking to invest in AI stocks, Nvidia (NASDAQ: NVDA) and Palantir Technologies (NYSE: PLTR) They were two of the most popular choices.
In the past two years, Nvidia shares have risen 728%, and Palantir shares have risen 348%. But Wall Street analysts expect the shares to move in opposite directions over the next 12 months, as detailed below:
Here’s what investors need to know about AI stocks.
1. NVIDIA
Nvidia is known for Graphics Processing Units (GPUs)chips that have become the industry standard in accelerating complex data center workloads like training. Machine learning Models and Operation of AI Applications. In March, Forrester Research “Nvidia sets the pace for AI infrastructure around the world,” he wrote. “Without Nvidia GPUs, modern AI wouldn’t be possible.”
However, the chipmaker is truly formidable because it offers an integrated computing platform made up of hardware, software and adjacent services. Nvidia has secured a lead in AI-powered networking equipment, and its first server CPU is headed toward a multibillion-dollar production line, according to CEO Jensen Huang.
Similarly, Nvidia says its software and services business will approach $2 billion in revenue this year due to the strength of its AI Enterprise offering. Nvidia AI Enterprise is a software platform that simplifies data preparation, model training, and the development and deployment of AI applications. The platform includes frameworks that address specific use cases, including conversational agents, recommender systems, and autonomous bots.
NVIDIA reported strong financial results for the second quarter of fiscal 2025 (ending July 2024). Revenue rose 122% to $30 billion on strong demand for AI hardware and software, and non-GAAP earnings rose 152% to $0.68 per diluted share. More importantly, the company is well positioned to maintain this momentum.
Nvidia’s next generation of data center GPUs, called Blackwell, is set to go into production later this year, and the market is buzzing with anticipation. Earlier this year, CEO Jensen Huang predicted that “the Blackwell architecture platform will likely be the most successful product in our history.”
Looking ahead, Wall Street expects Nvidia’s adjusted earnings to grow 49% annually through fiscal 2026 (which ends in January 2026). That estimate makes the current valuation of 54 times adjusted earnings look reasonable. Patient investors should consider buying a small stake in Nvidia stock today.
2. Palantir Technologies
Palantir sells data analytics software. Its platforms help companies manage data, develop machine learning models, and integrate these digital assets into applications that improve decision-making. Palantir describes its core software products, Foundry and Gotham, as operating systems that connect data, decisions, and processes. Use cases range from supply chain management to financial risk mitigation to manufacturing optimization.
Last year, Palantir added support for large language models and generative AI to Gotham and Foundry using AIP (Artificial Intelligence Platform). The company also refocused its new product go-to-market strategy with AIP Bootcamps, educational events where potential customers learn how to use AIP on their own data in a matter of days.
In August, Forrester Research recognized Palantir as a leader among AI and machine learning platform vendors. “Palantir has quietly become one of the biggest players in this market,” the analysts wrote. Palantir received the highest score for its current product offering, but competitors alphabet and C3.I They received higher marks for their growth strategy.
Palantir reported encouraging financial results for the second quarter. Its customer base rose 41% to 593, and average customer spending increased 14% year over year. Revenue rose 27% to $678 million, its fifth consecutive acceleration, and non-GAAP net income jumped 80% to $0.09 per diluted share.
Looking ahead, CEO Alex Karp expects the company to maintain its momentum. “The continued and sustained demand for our software, for a powerful enterprise platform that makes AI capabilities useful to large enterprises, shows no signs of abating.”
The problem is valuation. Wall Street expects adjusted earnings to grow 22% annually through 2025. That makes the current valuation of 109 times adjusted earnings look expensive. I personally agree with Wall Street. Palantir looks overvalued, and I wouldn’t be surprised if it saw a significant correction in the future. Investors should consider reducing their positions.
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Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewein The Motley Fool has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has Disclosure Policy.
Nvidia vs. Palantir: Wall Street Says Buy One, Sell the Other Originally posted by The Motley Fool
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