Why You Should Consider These 2 AI Stocks Over Palantir

Published Date : 12/09/2025 

Palantir may have grabbed the spotlight, but its high valuation makes it a risky bet. Discover two AI stocks that offer better value and growth potential. 

Artificial intelligence (AI) has the potential to revolutionize the global economy, with estimates suggesting it could add up to $15.7 trillion over the next five years. Few AI companies have captured the attention of investors quite like Palantir Technologies (NASDAQ: PLTR). However, while Palantir has seen strong double-digit growth in both sales and earnings, this has also pushed its valuation to extreme levels. Even after a recent pullback, Palantir stock trades at more than 500 times earnings and about 112 times sales. These numbers are hard to justify, making Palantir a risky investment.

In my view, Palantir stock is just too expensive. I wouldn’t buy it until shares trade at a valuation that reflects its actual value. Instead, there are two AI stocks that still offer significant potential and better value: Nvidia (NASDAQ: NVDA) and Alphabet (NASDAQ: GOOGL).

Nvidia remains the clear leader in AI. Its advanced graphics processing units (GPUs) are the backbone of nearly every AI model and application on the market. The company is supported by one of the largest capital expenditure cycles in history, with around $3 trillion expected to be spent on data centers in the coming years. While not all of this will go to Nvidia, a significant portion will.

At the moment, Nvidia’s Blackwell chips are far ahead of the competition. While Advanced Micro Devices’ (AMD) next generation of chips will narrow the gap, Nvidia’s current update cycle means that the successor to Blackwell, Rubin, will be here soon. Nvidia’s incredible success has also given it the resources, both in terms of money and personnel, to maintain its technical leadership.

But Nvidia’s real moat isn’t just its hardware. The company’s CUDA software platform, which allows GPUs to perform tasks far beyond the graphics rendering they were originally made for, is a foundation on which AI software is built. CUDA is so deeply embedded in AI engineering that switching from Nvidia’s ecosystem would require companies to overhaul major parts of their software stacks and replace or retrain engineers—a very costly process. The strength of this moat is part of what allows Nvidia to charge premium prices and maintain sky-high margins.

It’s hard to see a future in which AI is successful and Nvidia is not, and although its stock is far from cheap, its premium valuation is justified. Nvidia’s consistent innovation and strong market position make it a solid choice for investors looking to capitalize on the AI revolution.

Alphabet, the parent company of Google, also offers significant potential in the AI space. With massive data advantages and the ability to offer deep integrations across its platforms, Alphabet is well-positioned to lead in AI. Google’s AI capabilities are already integrated into its search, advertising, and cloud services, providing a strong foundation for future growth.

One of Alphabet’s key strengths is its vast data resources. Google processes an enormous amount of data every day, which is crucial for training and improving AI models. This data advantage, combined with its deep integrations across various platforms, gives Alphabet a unique edge in the AI market. Additionally, Google’s ongoing investments in AI research and development ensure that it remains at the forefront of technological advancements.

While Palantir’s high valuation makes it a risky bet, Nvidia and Alphabet offer better value and growth potential. Both companies have strong market positions, significant resources, and a track record of innovation. For investors looking to capitalize on the AI revolution, these two stocks are worth considering over Palantir.

In conclusion, while Palantir has made significant strides in the AI space, its high valuation makes it a less attractive investment. Nvidia and Alphabet, on the other hand, offer better value and growth potential, making them more compelling choices for investors. Consider these two AI stocks for a more balanced and promising investment portfolio. 

Frequently Asked Questions (FAQS): 

Q: Why is Palantir's stock considered overvalued?

A: Palantir's stock trades at more than 500 times earnings and about 112 times sales, which are extremely high multiples. These valuations are hard to justify given the company's current financial performance and market position.

Q: What is Nvidia's main competitive advantage in the AI market?

A: Nvidia's main competitive advantage is its advanced GPUs and the CUDA software platform, which is deeply embedded in AI engineering. This makes it difficult and costly for companies to switch to other ecosystems, allowing Nvidia to maintain high margins.

Q: How does Alphabet's data advantage benefit its AI initiatives?

A: Alphabet's vast data resources, processed through Google's search and other services, provide crucial training data for AI models. This data advantage, combined with deep integrations across platforms, gives Alphabet a unique edge in the AI market.

Q: What is the significance of Nvidia's Blackwell chips in the AI industry?

A: Nvidia's Blackwell chips are currently the most advanced GPUs in the market, providing the computational power needed for complex AI models and applications. They are a key component in many AI systems and are expected to be succeeded by even more advanced chips, maintaining Nvidia's leadership.

Q: Why should investors consider Nvidia and Alphabet over Palantir?

A: Nvidia and Alphabet offer better value and growth potential due to their strong market positions, significant resources, and a track record of innovation. Their valuations are more justified compared to Palantir's, making them more attractive investments in the AI space. 

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