Meet the Artificial Intelligence (AI) Stocks That Could Become the Next Palantir, or Even Better

Palantir Technologies (PLTR 0.56%) is quickly becoming a provider of artificial intelligence (AI) software platforms to businesses and governments worldwide. This is evidenced by the company’s recent acceleration in growth, as well as its improving revenue stream. Both indicators point to better times ahead.

Investors are taking notice and buying Palantir stock in droves. The stock is up an impressive 76% so far in 2024, and the discussion below provides some clues as to why.

Palantir’s AI software platform has gained impressive popularity

When Palantir reported its second-quarter results last month, the company reported year-over-year revenue growth of 27% to $678 million. That was a solid improvement over the 13% year-over-year growth the company achieved during the same period last year, and an acceleration of first-quarter revenue growth of 21%.

There was a big jump in the company’s customer base, as well as in the size of the deals it was doing with customers. Palantir’s management attributed its improving growth profile to the growing adoption of its Artificial Intelligence Platform (AIP), a software platform that helps enterprises and governments integrate generative AI into their processes to help improve operational efficiency.

From helping customers build their own large language model (LLM)-based applications to helping them accelerate everyday workflows with generative AI, Palantir’s AIP utility seems to be hitting a sweet spot with customers. That explains why the company raised its revenue growth forecast for 2024 and expects its top line to grow 24% this year to $2.75 billion.

More importantly, Palantir looks poised to sustain its exceptional growth over the long term, given that it ended the previous quarter with $4.3 billion in outstanding deal value (RDV). That metric refers to the total outstanding value of Palantir’s contracts at the end of the period, and was up 26% year over year in Q2.

This AI hardware giant is making inroads into the AI ​​software market

Palantir thus appears to be well-positioned to capitalize on the huge end-market opportunity presented by the generative AI software market. However, there is another way for investors to capitalize on the growing demand for AI software, and a closer look might lead investors to conclude that this might be a better AI software stock than Palantir.

Nvidia (NVDA -4.08%) was the first choice for companies looking to buy high-end AI hardware to train AI models, which has resulted in remarkable revenue and profit growth for the company in recent months. Interestingly, comments from CFO Colette Kress on a recent earnings conference call suggest that Nvidia is also starting to make a dent in the enterprise AI software market. According to Kress, “we expect our software, SaaS and support revenue to approach $2 billion annually coming out of this year, with Nvidia AI Enterprise in particular contributing to the growth.”

CEO Jensen Huang also commented, pointing out that customers can deploy Nvidia AI Enterprise software for $4,500 per graphics processing unit (GPU) per year. Considering that Nvidia AI GPUs cost $30,000 or more per chip depending on the configuration, enterprise customers looking to build and deploy AI models are getting a good deal through Nvidia’s AI software platform.

Nvidia offers a variety of AI software offerings to customers. For example, the company’s AI Foundry platform, which launched in July of this year, is an end-to-end solution that allows customers to build and deploy custom generative AI models. Nvidia offers popular base models that can be modified by its customers and quickly move AI applications (including chatbots, content creation tools, and document processing tools) into production.

Nvidia also provides pre-trained, configurable AI workflows that can be used to extract data from PDFs or deployed to build customer service workflows, accelerate drug discovery in the medical field, or build custom generative AI applications tailored to an organization’s needs. It’s worth noting that adoption of Nvidia’s software solutions is growing at an incredible pace thanks to AI.

During its February earnings conference call, Nvidia executives indicated that its software and services offerings would achieve an annual revenue run rate of $1 billion in the fourth quarter of fiscal 2024. That’s a figure that would double the company’s software and services revenue run rate in just one year. That’s significantly faster than the rate at which Palantir’s top line is expected to grow this year.

Add to that the fact that Nvidia is benefiting greatly from surging demand for its AI chips, which led to a 122% year-over-year increase in the company’s revenue in the second quarter of fiscal 2025 to $30 billion, and it’s easy to see that the chipmaker is a more diversified AI player. It’s also worth noting that Nvidia shares are trading at 28 times sales, which is lower than Palantir’s 29 times sales.

Moreover, Nvidia is the more attractive AI stock when we compare the earnings multiples of both companies.

NVDA PE Ratio Data by YCharts

Investors looking for a cheaper alternative to Palantir to benefit from the growth in the AI ​​software market should therefore take a closer look at Nvidia, especially since the latter company already has a thriving AI hardware business, making it a better growth stock to buy right now.