Artificial intelligence (AI) is reshaping industries, driving innovation in automation, data analytics, and generative applications. AI adoption continues surging today, with enterprises and governments investing heavily in infrastructure and software to harness its potential.

Nvidia (NVDA) dominates the AI hardware landscape, powering data centers with its GPUs, which hold a commanding market share due to their efficiency in training AI models. Palantir Technologies (PLTR), a leader in AI software, excels in data analytics and operational AI solutions, serving both commercial and government clients with its platforms like Foundry and AIP. Both companies have seen remarkable stock gains, with Nvidia up over 650% and Palantir soaring some 1,350% in recent years, fueled by the AI boom.

Yet, their valuations and growth prospects differ significantly. Is Palantir the better buy today compared to Nvidia?

Why Nvidia is the Better AI Stock
Nvidia stands as the undisputed leader in AI hardware, commanding over 80% of the GPU market critical for training and running AI models. Its GPUs, like the H100 and Blackwell architecture, are the backbone of data centers powering AI applications for tech giants like Microsoft (MSFT) and Google.

In 2024, Nvidia’s revenue soared to $130.5 billion, with AI-driven data center sales accounting for nearly 80% of its growth, reflecting a 93% year-over-year increase. Its CUDA software ecosystem further cements its dominance, creating a high barrier to entry for competitors like AMD or Intel.

NVDA stock has surged over 650% in three years, yet its forward P/E ratio of 25 remains reasonable given its projected 24% annual revenue growth through 2027. The company’s innovation pipeline, including AI-optimized chips for autonomous vehicles and robotics, ensures sustained demand. Nvidia’s near-monopoly in AI hardware makes it a safer bet for investors seeking exposure to the AI boom, as its technology underpins virtually every AI application.

Betting on Nvidia is betting on the infrastructure of the AI revolution, offering stability and scalability in a rapidly growing market.

Why Palantir is the Better AI Stock

Palantir Technologies shines as a leader in AI software, delivering data analytics and operational AI solutions through platforms like Foundry and AIP. Its ability to integrate and analyze vast datasets has made it indispensable for government clients, like the U.S. Department of Defense, and commercial enterprises, including Airbus (EADSY) and BP (BP).

In 2024, Palantir’s revenue grew 29% to $2.9 billion, with U.S. commercial revenue spiking 54% as AI adoption accelerated. Its stock has skyrocketed 1,350% over three years, driven by expanding contracts and a sticky customer base with long-term, high-margin deals. Unlike Nvidia, Palantir’s software focus offers higher scalability and lower capital intensity, translating to potential margin expansion.

PLTR’s forward P/E of 177 reflects optimism but is justified by 32% projected annual growth through 2028. Palantir’s AI platforms are versatile, addressing diverse industries from healthcare to logistics, positioning it to capture a broader market as AI software demand outpaces hardware.

For investors seeking high-growth, software-driven AI exposure, Palantir’s unique positioning and momentum make it a compelling choice.

The Verdict: Why PLTR is the Better Buy
While Nvidia dominates AI hardware, Palantir’s software-driven growth, scalability, and diverse market applications give it an edge. Its soaring commercial revenue and long-term contracts signal stronger upside potential. It continues to rack up wins, such as its recent contract with NATO and one to link Social Security, the IRS, and immigration data into one centralized system, positioning it for monumental growth.

With AI software demand surging, PLTR’s versatility and high margins make it the better AI stock to buy today.

— Rich Duprey

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Source: Money Morning