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Nvidia (NVDA 1.92%) and Palantir Technologies (PLTR 5.53%) both experienced impressive stock performance last year, driven by the soaring demand for their AI-centric hardware and software solutions. However, 2025 has brought a different story for these high-growth stocks as market dynamics shift.
Nvidia’s stock has seen a decline of nearly 14% in 2025, whereas Palantir, after an initial strong performance this year, has similarly faced recent losses. Nevertheless, both companies remain well-positioned to capitalize on lucrative markets. Nvidia’s recent quarterly results indicate that the demand for its AI hardware continues to thrive. Meanwhile, Palantir is improving its growth prospects in light of the increasing need for generative AI software.
This situation raises the question: if you had to invest in one of these AI stocks today, which should be your pick? Let’s delve into the details.
The appeal of Nvidia
Investor confidence in Nvidia’s capacity to maintain its robust growth has been tempered by various factors, including export restrictions on its AI graphics processing units (GPUs), concerns over a possible slowdown in AI infrastructure investments, and emerging competitors using custom processors to reduce AI costs.
However, Nvidia’s latest quarterly earnings reveal consistent demand for its AI chips. The revenue for the fourth quarter of fiscal 2025 (ending January 26) surged by an impressive 78% year-over-year to a record $39.3 billion, with adjusted earnings increasing by 71% to $0.89 per share—both surpassing Wall Street’s forecasts.
The company’s outlook suggests it is poised to maintain this positive momentum, projecting revenues of $43 billion for the current quarter, reflecting a 65% year-over-year increase. There is potential for Nvidia to surpass these expectations as it increases the supply of its latest Blackwell processors, addressing the high demand from customers.
Importantly, the Blackwell architecture enhances Nvidia’s lead in the AI chip sector due to its flexibility. Executives highlighted that Blackwell caters to the full spectrum of AI applications, from pretraining and post-training to inference, across various platforms including cloud and on-premise setups.
Nvidia anticipates that the introduction of cost-effective reasoning models, like DeepSeek’s R1, will boost computing needs significantly. This trend favors the Blackwell architecture, which the company asserts can process requests 25 times faster and at a 20-fold lower cost than the previous H100 model. Such advancements make it likely that Nvidia will maintain its stronghold of approximately 85% in the AI chip market.
This confidence is also reflected in analysts raising revenue growth projections for Nvidia for the ongoing and coming fiscal years.
NVDA Revenue Estimates for Current Fiscal Year data by YCharts
Despite potential near-term margin pressures during the ramp-up of Blackwell production, Nvidia’s earnings are expected to grow by 50% in the current fiscal year. The company estimates that its adjusted gross margin will revert to the mid-70% range later in the fiscal year, following its current low-70% range.
Therefore, it is plausible to see Nvidia’s earnings grow at an accelerated rate as the year continues.
The case for Palantir Technologies
Palantir Technologies is a prominent player in the AI software platform market, which holds significant growth potential. Research from IDC suggests that this market could balloon from $28 billion in 2023 to $153 billion by 2028, growing at an annual rate of over 40%.
This rapid expansion in the AI software sector has positively impacted Palantir’s performance. The company reported a 29% revenue growth in 2024, up from a 17% increase in 2023. With its revenue nearing $2.9 billion last year, Palantir demonstrates considerable room for future expansion, given the overall market potential.
Notably, the speed at which Palantir is securing new contracts aligns with the expected growth of the AI software platform sector. In the fourth quarter of 2024, the company experienced a 40% year-over-year rise in its remaining deal value (RDV) to $5.4 billion, a marked improvement from the 22% growth noted in the previous quarter. This metric represents the total value of still-to-be-fulfilled contracts at the end of a quarter, suggesting the company is winning contracts faster than it can deliver, paving the way for enhanced future revenues and earnings.
Palantir is likely to see its revenue opportunities expand as new customers typically end up signing larger contracts, driven by the efficiency gains provided by its Artificial Intelligence Platform (AIP). The customer base grew by 43% year-over-year in the previous quarter, which should lead to increased deployments of AIP and further bolster RDV growth.
Additionally, established clients are spending more, which has contributed to improvements in Palantir’s profit margins. The adjusted operating margin rose by 11 percentage points year-over-year last quarter, and adjusted earnings surged by 64% in 2024, reaching $0.41 per share. Analysts foresee Palantir maintaining strong double-digit earnings growth in the near future, with potential for results to exceed current expectations given its enhancing revenue pipeline and margin progression.
PLTR EPS Estimates for Current Fiscal Year data by YCharts
The conclusion
Nvidia provides a pathway for investors to tap into the lucrative AI hardware sector, while Palantir offers a stake in the swiftly expanding generative AI software landscape. Each could serve a role in a diversified investment portfolio; however, Palantir’s valuation appears steep compared to Nvidia, which is demonstrating faster growth.
NVDA PE Ratio data by YCharts
Palantir’s high valuation has raised concerns about whether the stock may be overvalued, which has contributed to its recent pullback. Analysts forecast Palantir to experience only a 15% increase over the next year based on a median price target of $97. In comparison, Nvidia is projected to see a notable 51% increase over the next twelve months.
Considering Nvidia’s more favorable valuation and anticipated faster earnings growth, it may be a more attractive option for investors looking for better opportunities at present compared to Palantir.
Source
www.fool.com