Palantir Technologies (NASDAQ:PLTR) Although its stock price has soared 285% this year, Nvidia (NASDAQ:NVDA) The stock price rose 175%. Several billionaire fund managers sold some Palantir shares and bought more Nvidia shares during the third quarter, although both companies play important roles in the burgeoning artificial intelligence (AI) economy. .
Cliff Asness of AQR Capital Management sold 99,140 shares of Palantir stock, reducing his position by 16%. Meanwhile, he added 719,710 shares of Nvidia stock, increasing his position by 5%. Nvidia currently holds the largest position in AQR’s portfolio.
Citadel’s Ken Griffin sold 5.1 million shares of Palantir, reducing his holdings by 91%. Meanwhile, he bought 4.7 million shares of Nvidia stock, increasing his holdings by 194%. Nvidia holds the second-largest position in Citadel’s portfolio, excluding options contracts and index funds.
Steven Schoenfeld of Schoenfeld Strategic Advisors sold 60,384 shares of Palantir stock, completely eliminating his position. Meanwhile, he added 703,192 shares of Nvidia stock, increasing his holdings by 217%. Nvidia is Schoenfeld’s portfolio’s largest holding, excluding index funds.
Palantir provides data analysis software. Its core Gotham and Foundry platforms integrate information and machine learning (ML) models into ontologies, digital layers that define relationships between real-world objects. Businesses can use pre-built custom analytics tools to query ontology layers and uncover insights that improve decision-making.
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Palantir also has an artificial intelligence platform called AIP that brings generative AI support to its core products, allowing users to interact with the software using natural language. For example, a procurement team managing the supply chain at Foundry can simply ask the platform to review issues and suggest solutions if they arise.
Many vendors sell AI and analytics tools, but Palantir believes it is unique in its ability to operationalize AI. In other words, Palantir’s software allows clients to move prototype use cases into production more effectively than other solutions. While there may be some posturing in this belief, analysts agree that Palantir is the leader among AI/ML platforms.
Palantir reported strong financial results in the third quarter, beating expectations for revenue and bottom line. Revenue increased 30% to $725 million, and non-GAAP net income increased 43% to $0.10 per diluted share. Management attributes this strong performance to AIP’s momentum.
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“Our unwavering ability to guide and guide the demand for seamless integration of AI with critical data, distribution and decision-making structures is what truly sets us apart,” CEO Alex Karp wrote to shareholders. This was stated in a letter. While that confidence is undoubtedly reassuring for Palantir shareholders, the company’s valuation has become a serious issue.
Wall Street expects Palantir’s adjusted earnings to grow 27% annually through 2025. Therefore, the current valuation of 188 times earnings looks abnormally expensive. These numbers give the company a price-to-earnings ratio (PEG) of 7, and conventional wisdom suggests that anything with a PEG greater than 2 is expensive. Prospective investors should avoid this stock for now, and current shareholders should consider reducing their significant positions.
Dan Ives of Wedbush Securities says NVIDIA is “the cornerstone of the AI revolution.” The company designs the computing industry’s most coveted graphics processing units (GPUs). Nvidia accounted for 98% of data center GPU shipments over the past two years and has about 80% market share in AI accelerator chips. Its leadership is strengthened by CUDA, a robust ecosystem of software development tools.
A recent Wall Street Journal article explains how CUDA contributed to the rise of Nvidia: “Each year, Nvidia has responded to the needs of software developers by pumping out specialized code libraries on which they can perform a vast number of tasks, unlike traditional general-purpose processors like those made by Intel and AMD. Impossibly fast GPUs,” wrote the paper’s Christopher Mims.
Nvidia reported impressive financial results in the third quarter, beating expectations for revenue and bottom line. Revenue increased 94% to $35 billion, and non-GAAP net income increased 103% to $0.81 per diluted share. Investors have good reason to think this momentum will continue. Nvidia is currently ramping up production of its next-generation Blackwell GPUs, with CFO Colette Kress recently telling analysts that “demand is phenomenal.”
Looking ahead, Wall Street expects Nvidia’s adjusted earnings to grow at a 52% annual rate through fiscal 2026 (ending in January 2026). With this consensus, the current valuation of 52 times adjusted earnings looks very reasonable. These numbers indicate a PEG ratio of 1, which means Nvidia is significantly cheaper than Palantir. Patient investors should feel comfortable buying a position in this stock today.
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Trevor Jennewine has held positions at Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: February 2025 $27 short call on Intel. The Motley Fool has a disclosure policy.
“Palantir Stock vs. Nvidia Stock: Billionaires Buy One and Sell the Other” was originally published by The Motley Fool.
