Palantir and Nvidia symbolize two alternative ways to put money into AI.
Two of the preferred synthetic intelligence (AI) investments proper now are Nvidia (NVDA 3.37%) and Palantir (PLTR 4.67%). These firms symbolize reverse ends of the AI funding spectrum, with Nvidia on the {hardware} facet and Palantir on the software program facet.
These two have dominated their respective industries, however which is the higher funding selection between them? Let’s look at the proof.
Palantir and Nvidia aren’t opponents
First, let’s break down their core companies.
Nvidia makes graphics processing units (GPUs) and numerous items of {hardware} that help its GPU infrastructure. GPUs are the preferred selection for coaching AI fashions because of their flexibility. They will simply be configured to course of intense calculations because of their means to course of a number of calculations in parallel. Mix that with the flexibility to attach 1000’s of GPUs collectively, and Nvidia’s GPUs can quickly practice AI fashions.
Palantir is on the appliance facet of AI, with the fundamental premise of its software program being knowledge in and insights out. Whereas Palantir serves each industrial and authorities prospects, the most important use growth from its most up-to-date spherical of AI product launches has been industrial shoppers. Palantir’s Artificial Intelligence Platform (AIP) provides its customers the instruments to combine giant language fashions (LLMs) right into a enterprise, permitting AI to grow to be built-in all through a enterprise reasonably than being a stand-alone instrument used on the facet.
Palantir and Nvidia sit on reverse ends of the AI funding spectrum, however their enterprise case in each components is sort of clear. Nonetheless, their financials are fairly completely different.
Palantir’s progress pales compared to Nvidia’s
With how well-liked an AI funding Palantir is, it’s possible you’ll be shocked to study that its income progress fee within the second quarter was solely 27% 12 months over 12 months. Now, for many firms, 27% progress could be astounding, however with the tempo of AI adoption and innovation, this will appear a bit misplaced. Moreover, there are different software program firms which might be rising at an analogous tempo however aren’t centered on AI.
Nonetheless, that does not imply Palantir is a nasty funding. However traders want to know that it is no Nvidia.
In Q2 of fiscal 12 months 2025 (ending July 28), Nvidia’s income rose 122% 12 months over 12 months to $30 billion. So, not solely is Nvidia crushing Palantir when it comes to uncooked progress fee, nevertheless it’s additionally a far bigger firm, producing $30 billion in quarterly income versus Palantir’s $678 million.
In accordance with Wall Road analysts, this income progress outperformance can be anticipated to final for the subsequent couple of years.
NVDA Revenue Estimates for Current Fiscal Year knowledge by YCharts
Per these estimates, traders can anticipate these progress charges:
| Fiscal Yr | Nvidia Income Development Price | Palantir Income Development Price |
|---|---|---|
| Present fiscal 12 months | 106% | 24% |
| Subsequent fiscal 12 months | 41% | 20% |
| Two fiscal years forward | 17% | 20% |
Information supply: YCharts.
These are estimates, so they don’t seem to be excellent, nevertheless it’s pretty clear that Nvidia will outgrow Palantir, at the least by means of the subsequent fiscal 12 months. Nonetheless, the costs these shares commerce at are fully mismatched.
NVDA PE Ratio (Forward) knowledge by YCharts
Nvidia is way cheaper from a forward price-to-earnings (P/E) standpoint, however that is not honest to Palantir because it’s nonetheless engaged on reaching most profitability.
To assist out this comparability, as an example Palantir can obtain 30% revenue margins and develop its income at a 20% tempo for the subsequent 5 years. If it does that, it will commerce at 45 occasions trailing earnings at at the moment’s costs. So, for Palantir to commerce across the similar value Nvidia is now, it’s important to quit 4 years of returns.
This shows how expensive Palantir’s stock is and pushes me towards recommending Nvidia over Palantir on this matchup. Palantir is a implausible firm, however the expectations constructed into its present valuation are far too excessive. As an alternative, Nvidia seems to be like a a lot better purchase than Palantir, as it’s going to nonetheless be rising quickly however trades at a much more cheap price ticket (even when that price ticket is a bit costly).
Keithen Drury has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Nvidia and Palantir Applied sciences. The Motley Idiot has a disclosure policy.