Palantir trades at a stratospheric 109x revenue, while Nvidia’s 24x sales seem almost (almost!) reasonable by comparison.
Palantir’s military-style data analytics platform limits its addressable market compared to Nvidia’s universal AI infrastructure.
Both stocks are priced for a perfect AI future that may not materialize smoothly, and investors could find better opportunities elsewhere in the AI ​​ecosystem.
10 stocks we like more than Nvidia ›
The stock market hasn’t been the same since OpenAI released ChatGPT to the public three years ago. As of December 4, the S&P 500(SNPINDEX: ^GSPC) The market index has recorded a total return of 75% since then. heavy technology Nasdaq-100 The index gained a dividend-adjusted 118% over the same period.
But the kings of artificial intelligence (AI) are far above these not-so-common returns. AI Chip Champion NVIDIA(NASDAQ: NVDA) has grown more than tenfold and the AI ​​platform dominates Palantir Technologies(NASDAQ: PLTR) more than doubled Nvidia’s stellar earnings:
PLTR Total Return Level Data by YCharts
But past performance is never a guarantee of future results. What investors care about today is a fundamentally different question: Which AI stock is the best investment to make new money today?
Let’s address the elephant in the room, or the rocket into the stratosphere directly above Wall Street. Palantir stock has gone absolutely parabolic in 2025, trading at roughly 109 times revenue. That three-digit figure is not a typo. To put it in context, even during the wildest times of the dot-com bubble, most of the high-flyers were around 50x in sales.
Meanwhile, Nvidia has seen its valuation compress even as its business continues to break records. At roughly 24 times earnings, it’s still priced perfectly. However, compared to Palantir, Nvidia’s stock price seems almost reasonable.
Mind you, Nvidia is already absolutely huge and it should be harder to sustain hypergrowth from a $187 billion annual revenue base. Palantir’s sales over the past 12 months seem minuscule in comparison, capped at $3.9 billion. The law of large numbers says that Nvidia’s sales growth must slow at some point. Meanwhile, Palantir’s long-term value is limited by its focus on the smaller government contracts market. The company is also pushing to sign commercial contracts, but how many companies need military-style data analytics?
Palantir’s recent surge suspiciously coincides with a favorable change in the federal spending environment. The company’s government revenue, while growing at a respectable 40% year over year, suddenly appears poised to accelerate as Washington embraces AI-powered defense and intelligence applications.
But here’s the risk no one talks about: government contracts follow political cycles. What happens if spending priorities change after the 2026 midterms? What if the regulatory environment becomes less friendly to aggressive data analysis? Palantir’s commercial business is growing faster, up 54%, but government contracts still account for nearly half of revenue. This means great exposure to political winds that can change direction every two years (with more pronounced changes around the four-year presidential election cycle).
Nvidia faces its own unique challenge: its biggest customers are becoming its biggest competitors. Amazon, Alphabetand microsoft They are all developing custom AI chips and at the same time buying billions worth of Nvidia GPUs. It’s like selling weapons to armies that are simultaneously building their own arsenals. Nvidia can maintain this delicate balance, but it requires constant innovation and careful relationship management.
I can’t believe I’m writing this, but at current prices, Nvidia is the better buy, and that’s despite my concerns about customer competition and a still rich valuation. Here’s why:
Valuation sanity: Okay, “sanity” is a stretch, but with sales at 24x vs. 109x, Nvidia’s premium is at least loosely based on financial reality.
Pit tested: The CUDA ecosystem lock-in is real and proven, while Palantir’s competitive advantages remain harder to quantify.
Diversification: Nvidia sells everyone on AI; Palantir’s concentration on government and large companies limits its target market.
Earning machine: Nvidia’s 57% net margin versus Palantir’s 20% shows who is really printing money today.
But here’s the real takeaway: Both stocks are priced for a perfect AI future that may not materialize as easily as the bulls hope. Palantir needs flawless execution and continued government spending on AI to justify its valuation. Nvidia needs to fend off increasingly capable competitors while maintaining its edge in innovation. Both may be successful in the long run, but it won’t be easy.
Image source: Getty Images.
For investors seeking exposure to AI today, the smartest move might be to look to other parts of the ecosystem, perhaps to hyperscalers building AI services, to semiconductor equipment makers enabling the entire industry, or even to “boring” companies successfully implementing AI to improve their operations. Sometimes the best investment is not choosing between two expensive options, but finding a completely different third path.
So if I were forced to choose between these two AI titans, I would reluctantly choose Nvidia. But I reduced my exposure to Nvidia in 2025, converting some of my gains from the AI ​​boom into cash gains.
My highest conviction call in this matchup is simple: Neither stock really offers a compelling balance of risk and reward for new money at December 2025 prices. The AI ​​revolution is real, but that doesn’t mean every AI stock is a buy at any price.
Before you buy Nvidia stock, consider this:
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Anders Bylund has positions in Alphabet, Amazon and Nvidia. The Motley Fool ranks and recommends Alphabet, Amazon, 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.
Best AI Stock: Palantir Technologies vs. Nvidia was originally published by The Motley Fool
