Many artificial intelligence (AI) companies experienced surging growth over the past few years, and two of the most popular have been Palantir Technologies(NASDAQ: PLTR) and Nvidia(NASDAQ: NVDA). Palantir's stock is up more than 1,160% over the past three years, and Nvidia's has spiked 532%.
But with tariffs and economic uncertainty, even AI stocks have stumbled a bit lately. In light of the recent market volatility, let's take a look at which of these two companies looks like the better AI stock right now.
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The case for Nvidia
Nvidia makes the processors that are central to most of the world's AI data centers. The company's semiconductors have an estimated 75% to 95% of the AI accelerator market, and these superior processors have been the company's financial springboard.
Nvidia's sales rose 78% year over year to $39.3 billion in the fourth quarter of fiscal 2025, and earnings per share spiked 82% to $0.89. Many tech companies are investing large sums of money to build out AI data centers -- including Microsoft, Alphabet, Meta Platforms, Apple, and others -- spending hundreds of billions of dollars collectively.
The spending spree won't last forever, of course, but no one really knows when it'll stop. Some companies have slowed their data center investments, while others continue to ramp up. But one thing that's very clear right now is that no tech company wants to fall behind in AI. Training new AI models usually includes using the most advanced chips for training, and Nvidia's are the best.
Nvidia plays such a central role in advanced AI right now and has such a lead in this space that it's very difficult for any of the company's competitors to catch up to Nvidia's anytime soon.
The case for Palantir
Palantir recently reported its latest financial results for its first quarter, and it was another impressive one for the company. Revenue jumped 39% year over year to $884 million, and Palantir's earnings doubled to $0.08 per share.
Palantir CEO Alexander Karp said his company is "in the middle of a tectonic shift in the adoption of our software" that's leading to strong growth. Management raised its full-year guidance, with sales expected to be about $3.9 billion, up from its previous guidance of $3.75 billion.
Palantir makes its money selling AI-powered analytics software both to the government and other companies. Most of its business comes from the U.S. government, with 42% of total revenue from these contracts in the first quarter. U.S. government sales rose 45% from the year-ago quarter, showing the company's strength in this segment.
Why Nvidia is the better AI stock
Both Nvidia and Palantir are growing fast, and they both will likely continue to be good investments over the long term. But I think Nvidia is a better buy right now because its stock is so much cheaper relative to Palantir.
Palantir has a forward price-to-earnings multiple of 196, which is very high by any measure and far more expensive than Nvidia's forward P/E ratio of 26. That doesn't mean Nvidia is cheap, but it certainly looks like a more reasonable valuation than Palantir's.
Both Nvidia and Palantir are successful AI companies and growing fast, but Palantir's valuation is simply too high to justify paying for. That makes Nvidia's stock much more attractive if you're looking for a great artificial intelligence play.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Apple, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
