Nvidia stock vs. Palantir stock: Wall Street says buy one and sell the other

Consultancy PwC estimates that artificial intelligence (AI) will contribute more than $15 trillion to the global economy by 2030. Investors hoping to benefit are piling into AI stocks and Nvidia (NVDA -0.03%) and Palantir Technologies (PLTR 1.95%) were two of the most popular choices.

Over the past two years, Nvidia shares are up 728%, and Palantir shares are up 348%. But Wall Street analysts expect stocks to move in opposite directions over the next 12 months, as detailed below:

• Nvidia’s average target of $150 per share implies a 26% upside to the current share price of $119.
• Palantir’s median target of $28 per share implies a 20% downside to the current share price of $35.

Here’s what investors should know about these AI stocks.

1. Nvidia

Nvidia is best known for its graphics processing units (GPUs), chips that have become the industry standard in accelerating complex data center workloads, such as training machine learning models and running AI applications. In March, Forrester Research wrote: “Nvidia is setting the pace for AI infrastructure worldwide. Without Nvidia GPUs, modern AI would not be possible.”

However, the chipmaker is truly formidable because it offers a full-stack computing platform that encompasses hardware, software, and adjacent services. Nvidia has secured leadership in generative AI networking equipment, and its first server central processing unit (CPU) is headed for a multibillion-dollar product line, according to CEO Jensen Huang.

Nvidia also says its software and services business will approach $2 billion in revenue this year, thanks to its AI Enterprise power. Nvidia AI Enterprise is a software platform that simplifies data preparation and model training, as well as the development and deployment of AI applications. The platform includes frameworks that address specific use cases, including conversational agents, recommender systems, and autonomous robotics.

Nvidia reported strong financial results in the second quarter of fiscal 2025 (ended July 2024). Revenue rose 122% to $30 billion on strong demand for AI hardware and software, and non-GAAP (generally accepted accounting principles) earnings rose 152% to $0.68 per diluted action. More importantly, the company is well positioned to maintain this momentum.

Nvidia’s next generation of data center GPUs, dubbed Blackwell, will go up later this year, and the market is buzzing with anticipation. Earlier this year, CEO Jensen Huang predicted, “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 (ending January 2026). That estimate makes the current valuation of 54 times adjusted earnings look reasonable. Patient investors should consider buying a small position in Nvidia stock today.

2. Palantir Technologies

Palantir sells data analysis software. Its platforms help businesses manage data, develop machine learning models, and integrate those 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 operations. Use cases range from managing supply chains to mitigating financial risk to optimizing production.

Last year, Palantir added support for large language models and generative AI to Gotham and Foundry with AIP (Artificial Intelligence Platform). The company also refocused its go-to-market strategy around the new product with AIP Bootcamps, training events where potential customers learn 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 providers. The analysts wrote: “Palantir is quietly becoming one of the biggest players in this market.” Palantir received the highest score for its current product offering, but competitors Alphabet and C3. have scored higher for their growth strategy.

Palantir reported encouraging financial results in the second quarter. The number of customers increased by 41% to 593 and the average customer spent 14% more in the last year. In turn, revenue increased 27% to $678 million, the fifth sequential acceleration, and non-GAAP net income increased 80% to $0.09 per diluted share.

Going forward, CEO Alex Karp expects the company to maintain its momentum. “The persistent and unbridled demand for our software, for an efficient enterprise platform that makes AI capabilities useful for large institutions, shows no signs of letting up.”

The problem is valuation. Wall Street forecasts adjusted earnings growth of 22% annually through 2025. That makes the current valuation of 109 times adjusted earnings look expensive. Personally, I agree with Wall Street. Palantir seems overvalued and I wouldn’t be surprised to see a substantial correction in the future. Investors should consider reducing their positions.