Prediction: 2 AI Stocks Will Be Worth More Than Palantir Technologies Within a Year

Palantir Technologies stock returned 240% in the past year, bringing its market value to $199 billion as of March 2. But certain Wall Street analysts think Shopify (NYSE: SHOP) and Advanced Micro Devices (NASDAQ: AMD) will top that figure within a year.

• Tyler Radke at Citigroup has set Shopify with a target price of $175 per share. That implies 56% upside from its current share price of $112. It also implies a market value of $228 billion.

• Jim Kelleher at Argus has set Advanced Micro Devices with a target price of $160 per share. That implies 60% upside from its current share price of $100. It also implies a market value of $259 billion.

Those forecasts may be too aggressive, but I do believe Shopify and AMD can achieve $200 billion market values within 12 months, topping what Palantir is currently worth in the process. Here's why.

Shopify offers a turnkey solution for retail. Its software helps sellers run their businesses across physical and digital stores. Shopify also provides adjacent financial services for payments processing, bill payments, tax filing, and account management. And it supports merchants with solutions for marketing, logistics, wholesale, and cross-border commerce.

The company two years ago introduced Shopify Magic, a suite of artificial intelligence (AI) tools that can draft product descriptions, edit images, and surface business insights. Shopify also uses AI internally to support its sales, customer service, and human resources teams. President Harley Finkelstein on the fourth-quarter earnings call told analysts, "Shopify will very much be one of the major beneficiaries in this new AI era."

Anthony Chukumba at Loop Capital views Shopify as an underappreciated AI stock. "We believe Shopify will be able to grow its revenue at a much faster rate than its operating expenses for the foreseeable future, which will result in operating and free cash flow margin expansion and a higher valuation," he wrote in a note to clients in December.

Shopify reported mixed results in the fourth quarter, missing estimates on the bottom line. Revenue increased 31% to $2.8 billion, the second consecutive sequential acceleration, and non-GAAP earnings increased 29% to $0.44 per diluted share. Also, Shopify reported a 10-basis-point increase in take rate, meaning merchants are engaging more deeply with its adjacent services.

Importantly, Shopify accounted for 12% of retail e-commerce sales in the U.S. last year, up from 10% in the prior year, meaning it gained two percentage points of market share. That makes Shopify the second largest domestic e-commerce company behind Amazon, and management expects further market penetration in the coming year.