Palantir vs. Nvidia: Which AI Stock Is the Better Buy?

The artificial intelligence boom has fueled massive gains for tech stocks, but which companies offer the best opportunities now? Let's compare Palantir and Nvidia, two AI giants, to see which is a better investment today.

Nvidia's Hardware Dominance

Nvidia is the leading maker of graphics processing units (GPUs), the powerful chips that drive AI models. They currently dominate the market, but rivals like AMD and Broadcom are emerging. Demand for AI infrastructure won't grow at this rate forever. Eventually, companies will replace processors less often.

Palantir's Software Edge

Palantir provides AI-powered data analytics platforms to both commercial and government clients. Its software helps decision-makers act quickly using the latest information. Palantir also offers automation tools that assign AI agents to tasks traditionally done by humans.

Growth and Valuation

Both companies are growing at similar rates. However, Palantir's stock has become quite expensive as its valuation has soared. Nvidia's valuation is comparatively cheaper, trading at 42 times forward expected earnings, while Palantir's ratio tops 275.

The Verdict

Nvidia has a head start. Its shares should outperform Palantir as Palantir grows into its expensive valuation. Despite Palantir's more sustainable subscription business model and similar growth rates, Nvidia is the better AI stock to buy right now.

Investment Opportunities

The Motley Fool's Stock Advisor team identified 10 stocks, not including Palantir, that could deliver monster returns. Stock Advisor's average return is 1,044%, which outperforms the S&P 500's 188%. Investors should consider these alternatives.