Palantir Technologies shares (PLTR 2.29%) and Nvidia (NVDA 3.14%) has made surprising gains this year thanks to growing demand for both artificial intelligence (AI) hardware and software, but one of these stocks has outperformed the others by a wide margin. It’s worth noting that there are.
Palantir stock’s 345% rise (as of this writing) is significantly higher than Nvidia’s 188% rise this year. But does this mean Palantir is the better AI stock to buy between the two? Let’s find out.
Palantir Technologies Case Study
Nvidia may have made a name for itself as the go-to chip provider for companies looking to train AI models, but Nvidia is also making a name for itself by helping businesses and governments bring these models into production. What we have is Palantir. More importantly, adoption of Palantir’s Artificial Intelligence Platform (AIP), which enables companies to integrate large-scale language models (LLM) and generative AI into their operations, is rapidly increasing. and the revenue pipeline accelerated rapidly.
Sales for the third quarter of 2024 were $726 million, an increase of 30% compared to the same period last year. For comparison, Palantir’s 2023 sales grew at a much slower pace of 17%. The company’s growth has accelerated as the year has progressed, with Palantir’s management noting in its November earnings call that “AIP-led momentum continues.” Both in expanding your business and acquiring new customers. ”
After all, Palantir’s customer count grew by a solid 39% year over year. Deal size also increased, with the number of deals worth at least $1 million increasing by 30% from the previous quarter to 104.
The company isn’t just attracting new customers for its AI software platform. We are also gaining more business from our existing customers. This is evidenced by Palantir’s net dollar retention rate of 118% in the third quarter. This metric compares Palantir’s trailing 12-month revenue at the end of the quarter to its trailing 12-month revenue from the same customer cohort for the year. previous era. The company’s net dollar retention rate for the year-ago period was 107%, suggesting increased adoption of the platform by existing customers.
Palantir also has a strong revenue pipeline and should be able to maintain impressive growth in the future. This is evidenced by the company’s outstanding trading volume (RDV) worth $4.5 billion, which grew 22% year over year last quarter. RDV is the total residual value of the company’s contracts at the end of the period, so the impressive growth in this metric bodes well for Palantir.
From the above discussion, you can see why Palantir has raised its full-year guidance and now expects 2024 sales to be just over $2.8 billion. This represents a 25% increase over 2023 sales of $2.23 billion. Forecasts for the next two years have also been raised.
PLTR earnings forecast data for the current year by YCharts.
As the chart above shows, Palantir’s sales are expected to grow at a rate of more than 20% over the next two years. But we wouldn’t be surprised to see the company experiencing strong growth, thanks to the huge opportunity in the AI software platform market, which is expected to grow nearly 41% annually through 2028.
Therefore, Palantir may remain a top AI stock for a long time to come.
For Nvidia
While Nvidia’s stock returns this year pale in comparison to those measured by Palantir, investors should remember that the company is playing a key role in the spread of AI. The chipmaker reportedly controls more than 85% of the AI datacenter graphics processing unit (GPU) market, which explains why the company has seen impressive quarter-over-quarter growth.
NVDA Revenue (TTM) data by YCharts.
It’s worth noting that Nvidia’s dominance in the AI GPU market is so strong that it’s difficult for rivals to make inroads into its business. The company has reportedly sold out all capacity for next year’s new Blackwell graphics cards, but the good news is that it’s taking steps to ensure supply increases.
Unsurprisingly, NVIDIA is expected to deliver impressive growth in 2026 following its impressive performance so far this year. The forecast for the next few years is also very strong, with 2025 revenue expected to increase 112% to $129 billion.
NVDA earnings forecast data for the current year by YCharts.
Even better, Nvidia remains a top growth stock to buy for the long term, even after posting impressive gains over the past few years. Driving factors such as surging demand for AI chips and enterprise software, the shift to accelerated computing, the adoption of digital twins, and increased chip content in vehicles are driving Nvidia’s focus on an addressable market worth a total of $1.7 trillion. This is probably the reason why it remains.
It’s also worth noting that Nvidia could pose a threat to Palantir in the enterprise AI software space. CFO Colette Kress said the following about the company’s latest earnings call:
We expect Nvidia AI Enterprise’s full-year revenue to more than double from last year, and our pipeline continues to build.
Overall, our software, services and support revenues are $1.5 billion annually and we expect them to exceed $2 billion annually this year.
So Nvidia looks like a more complete AI stock compared to Palantir. However, that’s not the only reason why AI appears to be the better of the two options.
judgment
We’ve already seen that Nvidia is growing faster than Palantir. More importantly, NVIDIA is expected to grow faster than Palantir next year, despite being a much larger company. All of this makes it a no-brainer to buy Nvidia stock over Palantir, especially after looking at the following chart.
PLTR PE ratio data by YCharts.
Nvidia is significantly cheaper than Palantir despite its superior growth. In fact, Palantir’s valuation is so lofty that the company’s 12-month median price target of $38 suggests a 50% downside from current levels. Meanwhile, NVIDIA has a 12-month median price target of $175. This would be an increase of 23% from current levels.
Additionally, given that Nvidia is addressing a larger addressable market thanks to its growing presence in AI software and dominance in hardware, AI stock is still a good buy for the long term. seems more appropriate.
