We recently published a list of 10 AI Stocks Everyone is Talking About These Days. In this article, we are going to take a look at where Palantir Technologies Inc. (NASDAQ:PLTR) stands against other AI stocks everyone is talking about these days.
President Donald Trump’s $500 billion investment plan to build AI infrastructure, Stargate, is making waves as analysts believe the project provides a new growth catalyst for major tech companies. Sasha Ostojic, Playground Global venture partner, said in a latest program on CNBC that the plan is just the beginning of AI “renaissance” in the country:
“Stargate is just the beginning, I think, of this renaissance of AI technology in this country, even though it seems like we’ve been in it for a few years. And, you know, it reminds me of the Apollo program from the 50s and 60s. In that case, it was a government-run program that created a bunch of technology, propelled the world forward, created a bunch of companies, and set us up for a lot of prosperity in the decades to follow.”
Ostojic also talked about the Jensen Huang-led company and said its stock has been going “sideways” and the market is waiting for the next big “trigger.” He is bullish on the company and thinks the $500 billion plan with the company at its center could be the next growth catalyst investors were waiting for.
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For this article, we picked 10 AI stocks currently trending on the back of the latest news. With each stock, we have mentioned the number of hedge fund investors. 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
Malik Ahmed Khan from Morningstar in a recent program on CNBC explained why he is worried about Palantir Technologies Inc. (NASDAQ:PLTR) valuation.
“The US commercial side of the business is actually doing really well and is firing on all cylinders. Our issue with Paler as a stock has been its valuation, and that’s what we’ve highlighted over the last few quarters. The valuation is getting out of hand, especially if you think about trying to bake in the assumptions that would take you to the current stock price. Those are some very, very optimistic assumptions.”
The analyst is right. Palantir’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 10th on our list of AI stocks everyone is talking about these days. 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 time frame. 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.
