We recently published a list of Top 10 AI Stocks That Should Be On Your Watchlist for 2025. In this article, we are going to take a look at where Palantir Technologies Inc (NYSE:PLTR) stands against other top AI stocks that should be On your watchlist for 2025.
Investors are looking for new growth horizons in the AI industry to gauge whether the current market rally can continue for the years to come. Chetan Puttagunta, Benchmark general partner, said he’s noticed a lot of innovation in the past few weeks focused on improving the efficiency of algorithms.
“In the last six to eight weeks, we’ve seen a tremendous amount of innovation, especially at the model layer, and then for the last two years at the application layer, taking advantage of all the advances in the AI models. Specifically, what’s happening at the model layer is, as we move into an inference-time or test-time compute paradigm, you’re seeing a lot more advantage to entrepreneurs and technical founders that are able to push to the frontier with algorithmic innovation.”
To explain how AI is now actually improving workflows, Puttagunta gave the example of Sierra, a conversational AI startup making customer service solutions.
“So think of this Sierra AI agent, if you will, delivering the best customer service agent experience every time, replicated an infinite number of times. And that’s an experience that was previously not possible without AI.”
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For this article, we picked 10 AI stocks that are making moves amid the latest news. With each stock, we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Palantir Technologies Inc (NASDAQ:PLTR)
Number of Hedge Fund Investors: 43
George Tsilis, Senior Markets Contributor at TD Ameritrade, said while talking to Schwab Network that Palantir Technologies Inc (NASDAQ:PLTR) stock is expensive but it keeps going higher amid business strengths and the market is “dictating” its price.
“If you do look at the elements of price action relative to those numbers, just to give you some context here, the earnings estimates that the company is expected to earn on an adjusted basis for the full year of 2024—which is going to be ending in the next couple of weeks or so—is about 38 cents per share. So it’s right now trading at 200 times this year’s earnings and next year’s earnings around 160 times. Sales in the last four quarters for Palantir Technologies Inc (NASDAQ:PLTR), cumulative sales, were around 2.6 billion and change. So right now, it’s trading around 67 times sales.
So you have to ask yourself, is that expensive? One would say, you know, if Palantir Technologies Inc (NASDAQ:PLTR) was operating in a vacuum, unencumbered or uninfluenced by outside forces, perhaps, you know, favorable government contracts or anything else—yeah, it’s expensive. But you know, it’s still been moving higher.”
The analyst said it does not matter what value investors think about the stock anymore.
“The market is dictating the price, and the price has been moving higher.”
Palantir’s valuation has concerned many. The company’s revenue growth is expected to slow over the next two years, with estimates suggesting a 22% YoY growth rate, potentially bringing revenues to around $4 billion by fiscal 2026. If Palantir Technologies Inc (NYSE:PLTR) can improve margins by 100 basis points annually, it would be able to generate about $1.5 billion in adjusted operating income by FY26, with a present value of $1.3 billion when discounted at 8%. Applying an S&P 500-like growth multiple of 2.5 to 2.75 times earnings, Palantir Technologies Inc (NYSE:PLTR) would have a P/E of 46, translating to a price target of $27, significantly down from its current price.
Fidelity Growth Strategies Fund stated the following regarding Palantir Technologies Inc. (NASDAQ:PLTR) in its Q3 2024 investor letter:
“Untimely ownership of Palantir Technologies Inc. (NASDAQ:PLTR) (+47%) also hurt the fund’s relative result. This software and services firm, which operates in both government and commercial segments, saw strong growth during the quarter, largely driven by its “AIP” – or Artificial Intelligence Platform – offering. In early August, the company reported Q2 financial results that mostly met somewhat lofty expectations. We established a sizable holding in Palantir Technologies during the quarter, and at quarter end it was the second-largest position and a slight overweight.”
Overall, PLTR ranks 9th on our list of top AI stocks that should be On your watchlist for 2025. While we acknowledge the potential of PLTR, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
