Nvidia (NVDA) and Palantir (PLTR) were among the hottest stocks for 2024 — Nvidia’s 179.6% year-to-date gain makes it the world’s second-largest company by market cap, while Palantir’s 153.3% gain puts it down. is on the map as a mega-cap tech stock to be reckoned with, not to mention a new member of the S&P 500 (SPX).
Both stocks have benefited from being major players in the AI revolution. Both companies have an exciting future ahead of them, but there is a key difference between the two companies that makes one the more compelling opportunity at this time. What seems to be the best option for investors right now?
Huge gap in valuation on a price-to-earnings basis
Nvidia’s rally in 2024 has resulted in a relatively high valuation multiple of 47.5 times January 2025 earnings estimates. The S&P 500 trades at 24.7 times earnings, meaning Nvidia is roughly twice as expensive as the broader market.
However, with consensus earnings per share expected to grow to $4.01 per share for the fiscal year ending January 2026, Nvidia looks somewhat more acceptable at 33.6 times forward earnings. While this is still fairly expensive, it’s starting to look reasonable enough for a capital-heavy company that’s expected to grow earnings per share more than 40% for the year. While Nvidia sometimes comes under fire from value-minded investors for its above-average price-to-earnings multiple, Palantir is more expensive.
The massive 153% year-to-date gain has pushed Palantir shares to a stunning valuation of 122.4 times December 2024 earnings estimates. That’s more than double Nvidia’s valuation and nearly five times the broader market. With earnings per share expected to increase 19.4% to $0.43 per share for December 2025, the stock’s valuation has declined slightly but still trades at a hefty triple-digit multiple of 100.8 times forward earnings.
Look beyond price to earnings
Additionally, it’s not just the price-to-earnings ratio that makes Palantir look much more expensive than Nvidia. When looking at the two stocks on a price-to-sales basis, a popular metric often used to evaluate high-growth names like technology stocks and software stocks, Palantir trades at an astronomical price-to-sales ratio of 35.3, while Nvidia trades for a high but relatively cheaper 26.3 times sales.
What about PEG ratio?
Finally, it’s useful to compare the two stocks based on their PEG ratios (price-to-earnings-to-growth ratio), which is a popular valuation metric that’s useful for evaluating growth stocks like Nvidia and Palantir by calculating earnings growth. The PEG ratio is calculated by taking a stock’s price-to-earnings ratio and dividing it by its earnings growth rate. The lower the PEG ratio, the better the stock looks by this metric. Investors and analysts using this metric typically view a PEG ratio of 1.0x or less as undervalued.
So, how do you reconcile Nvidia and Palantir on this basis? Nvidia’s PEG ratio of 1.8 is a little higher than ideal but not exorbitant. Palantir, on the other hand, trades at a much higher PEG ratio of 10.4, indicating that it is likely overvalued even when accounting for its earnings growth.
There’s no doubt that Palantir is an exciting company, but a valuation multiple like that is difficult to maintain, and it leaves little room for error — if the company fails to meet analyst expectations or hits any speed bumps, the stock could quickly collapse.
Is NVDA stock a buy according to analysts?
Turning to Wall Street, NVDA has a Strong Buy consensus rating based on 39 Buys, three Holds, and zero Sells in the past three months. The average price target for NVDA stock of $152.86 suggests a potential upside of 10.7% from current levels.
See more NVDA analyst reviews
Is PLTR stock a buy, according to analysts?
Turning to Wall Street, PLTR has a consensus rating of Hold based on four Buy, six Hold, and six Sell ratings assigned in the past three months. The average price target for PLTR stock of $27.67 indicates a downside potential of 36.2% from current levels.
See more PLTR analyst reviews
Smart up
Wall Street analysts are more positive on Nvidia, as is TipRanks’ Smart Score system. Smart Score is a quantitative scoring system for stocks created by TipRanks. It gives stocks a score from one to 10, based on eight key market factors. A score of eight, nine or 10 is considered equivalent to superior performance. Scores of four, five, six, or seven are considered neutral, and scores of three or less are considered equivalent to a poor performance rating.
Nvidia boasts an Intelligent Outperformance equivalent score of 9.
Meanwhile, Palantir gets a much less favorable Neutral IQ score of 4.
Nvidia is the obvious choice
Both NVDA and PLTR are high-quality AI stocks, and their earnings are expected to grow significantly next year. However, Nvidia’s profits are expected to grow more than twice as much as Palantir. Despite this, Nvidia shares are trading for a much cheaper valuation multiple. Nvidia is often criticized as an “expensive” stock, but its forward earnings multiple is only a third of Palantir’s double-digit valuation, making it look quite cheap by comparison.
Additionally, sell-side analysts rate Nvidia a strong buy and see a 10.7% upside over the next 12 months, while they are more cautious on Palantir, rating it a “hold” and forecasting a potential 36.4% decline from current levels. This divergence in analyst opinions is another strong point in Nvidia’s favor.
I’m bullish on Nvidia based on its much cheaper valuation and superior earnings growth, making it the clear winner in this comparison of high-profile AI stocks. For investors looking to capitalize on the generative AI wave, Nvidia continues to emerge as a smart choice.
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