Nvidia vs. Palantir: Which AI Stock is the Better Investment?

Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR) achieved remarkable gains in the past year as both companies saw their share prices surge. This increase was driven by the rapid demand for their offerings in the artificial intelligence (AI) space, encompassing both hardware and software solutions. However, 2025 has presented a different situation for these popular growth stocks.

This year, Nvidia's stock has seen a decline of nearly 14%, while Palantir's shares have also pulled back after an encouraging start. Nonetheless, both companies remain positioned to take advantage of profitable market segments. Nvidia's latest quarterly performance illustrates that the demand for its AI hardware is still a major growth driver, whereas Palantir is experiencing enhancements in its growth trajectory due to the increasing need for generative AI software.

If you were to invest in one of these AI stocks today, which one should you choose? Let's analyze the strengths of each.

The Case for Nvidia

There have been doubts about Nvidia's capacity to maintain its impressive growth, fueled by concerns over export restrictions on its AI graphics processing units (GPUs), potential slowdowns in AI infrastructure investments, and competition from custom processors being utilized by major tech companies to reduce AI costs.

However, Nvidia's most recent earnings report indicates that demand for its AI chips remains robust. In the fourth quarter of its fiscal year 2025, ending on January 26, Nvidia's revenue surged by 78% year over year, reaching a record $39.3 billion. Additionally, adjusted earnings climbed by 71% to $0.89 per share, both figures surpassing Wall Street's expectations.

The guidance from Nvidia suggests that it is well-positioned to sustain its momentum. It anticipates revenue of $43 billion for the current quarter, representing a 65% increase compared to the same period last year. Nvidia may even exceed this forecast as it increases production of its next-generation Blackwell processors to meet robust customer demand.

The Blackwell processor is crucial for Nvidia's leadership in the AI chip industry due to its adaptability. During the latest earnings call, management emphasized that "Blackwell addresses the entire AI market from pretraining, post-training to inference across cloud, to on-premise, to enterprise." Moreover, new low-cost models, such as DeepSeek's R1, are likely to drive significant demand for computing power, which aligns well with Nvidia's Blackwell technology. Nvidia claims that this architecture can process requests 25 times more efficiently and at a 20 times lower cost than its previous H100 model, further solidifying Nvidia's predominant market share of around 85% in AI chips moving forward.

This trend has led analysts to revise their revenue growth projections for Nvidia for the current and next two fiscal years upwards.

Furthermore, Nvidia's earnings are projected to grow by 50% in the current fiscal year, even with short-term margin pressures anticipated during the scaling of Blackwell production. Nvidia expects its adjusted gross margin to rebound to the mid-70% range later in the fiscal year after initially dipping into the low-70% range.

As the year progresses, it's reasonable to expect Nvidia's earnings to not only grow but possibly exceed analyst expectations.

The Case for Palantir Technologies

On the other hand, Palantir Technologies stands out as a prominent player in the AI software platforms segment, which is projected to expand significantly in the coming years. According to IDC, the global market for AI software platforms could balloon from $28 billion in 2023 to $153 billion by 2028, representing an annual growth rate exceeding 40%.

This growing market is positively influencing Palantir's performance. The company reported a revenue growth of 29% in 2024, up from 17% in 2023. With a revenue of nearly $2.9 billion last year, Palantir has substantial potential for future growth, fueled by the expansive size of the AI software platforms market.

It’s noteworthy that the rate at which Palantir is securing new contracts is keeping pace with the anticipated growth of the AI software platforms sector, as projected by IDC. In the fourth quarter of 2024, Palantir reported a 40% year-over-year rise in its remaining deal value (RDV) — the total value of unfulfilled contracts — bringing it to $5.4 billion. This significant growth exceeded the 22% year-over-year increase seen in RDV during the third quarter, indicating that Palantir is signing contracts faster than it can fulfill them, paving the way for future revenue and earnings expansion.

Palantir's revenue pipeline is likely to further improve as new clients tend to engage in larger contracts, primarily due to the efficiency gains provided by its AI Platform (AIP). Over the previous quarter, Palantir's total customer base grew by 43% year-over-year. As new clients begin deploying the AIP across more operations, an increase in RDV is anticipated.

Additionally, increased expenditure from existing customers is enhancing Palantir's margins, with its adjusted operating margin increasing by 11 percentage points comparably from last year. Palantir's adjusted earnings soared by 64% in 2024, hitting $0.41 per share. Analysts expect the company to maintain robust double-digit growth in earnings, but given its improving revenue pipeline and margin enhancements, it’s possible for Palantir to surpass those expectations.

The Verdict

Investors looking to tap into the booming AI hardware market may find Nvidia appealing, whereas those interested in the increasing adoption of generative AI software might lean towards Palantir. Both companies could play a valuable role in a diversified investment portfolio. However, a key consideration is that Palantir's stock is currently evaluated at a considerable premium compared to Nvidia, which is experiencing faster growth.

Concerns regarding Palantir's elevated valuation have contributed to its recent stock decline. Analysts project Palantir to achieve modest gains of just 15% over the next year based on a median price target of $97. On the contrary, Nvidia's stock is expected to rise by 51% in the coming year according to analyst predictions.

This trend may reflect the affordability of Nvidia's valuation along with its anticipated rapid earnings growth, potentially leading the market to favor Nvidia over Palantir, thereby simplifying the decision-making process for investors in choosing between these two AI stocks.

Nvidia, Palantir, AI