Better Artificial Intelligence Stock: Palantir vs. Nvidia

Geoffrey Seiler, The Motley Fool

Sun, Apr 6, 2025, 12:35 PM 6 min read

Two of the hottest artificial intelligence (AI) stocks in 2024 were, no doubt, Palantir (NASDAQ: PLTR) and Nvidia (NASDAQ: NVDA). However, after posting huge gains last year, both stocks now find themselves well off their highs following the recent market pullback.

Let's look at which stock is the better investment option for investors right now.

Palantir and Nvidia have two very different businesses, but both have been big AI winners.

Nvidia is a semiconductor company that makes graphic processing units (GPUs). Its chips have become the backbone of AI infrastructure due to their fast processing speeds, which have proven ideal for training AI models and running inference. The company has created a wide moat through its CUDA software platform, which it developed way back in 2006 to allow its chips to be programmed for various purposes. Today, it has built on top of this program to have leading libraries and services designed for AI, which makes its chips so desirable.

Palantir, on the other hand, is a software analytics company. It initially made a name for itself in the government space, where its data gathering and analytics capabilities were used for mission-critical tasks such as fighting terrorism. However, with the advent of its AI platform, it has transformed into an AI operating system company that helps customers design and deploy AI solutions for various use cases.

Both companies have been seeing strong growth. Nvidia's revenue has more than doubled each of the past two years as large tech companies and AI start-ups race to build out AI infrastructure. Spending for AI infrastructure continues to rise, led by the big three cloud computing companies, which combined plan to spend a whopping $250 billion on capital expenditures (capex) this year related to building out their AI infrastructure. For its part, Nvidia has predicted that overall data center-related capex will rise to over $1 trillion by 2028.

Palantir, meanwhile, has seen accelerating growth as commercial customers flock to its AI platform and the federal government starts to embrace AI. Overall revenue growth climbed 36% last quarter, while U.S. commercial revenue soared 64%, and U.S. government revenue jumped 45%. Its customer count has grown 43% as the company attracts new commercial customers through its AI bootcamps.

Thus far, many of its commercial customers are still in the proof-of-concept phase. So, Palantir has a big opportunity as it moves these customers' solutions into production to tackle real-world problems.