Palantir vs. NVIDIA ETFs: Better AI Plays for 2025?

Palantir Technologies Inc (PLTR) - The stock performance of Palantir Technologies Inc has surged 386 7% year-to-date (YTD) in 2024 significantly outperforming NVIDIA Corporation which rose about 190% YTD [1] - Palantir's Artificial Intelligence Platform (AIP) has gained widespread adoption helping businesses integrate large language models into operations with scalability and adaptability leading to numerous deals worth over $1 million [2] - In Q3 2024 Palantir's customer base grew 39% year-over-year while transactions over $1 million surged 30% The company achieved a net-dollar retention rate of 118% up from 107% a year earlier indicating strong revenue generation from existing customers [3] - Palantir has a solid government customer base and is in discussions with other leading U S defense technology companies to form a consortium for bidding on U S government contracts [13] NVIDIA Corporation (NVDA) - NVIDIA continues to dominate the GPU market driven by strong demand for its Hopper architecture and upcoming Blackwell chips which promise even greater performance [4] - The new Blackwell chips such as the GB200 NVL72 deliver AI inference speeds 30 times faster than the H100 with tech giants like Microsoft Alphabet and Oracle heavily investing in these chips [5] - NVIDIA shipped 13 000 Blackwell chips last quarter with projections of 300 000 units in Q4 2024 and 800 000 units in Q1 2025 The Zacks Consensus Estimate for EPS rose 61 54% year-over-year to 84 cents for Q1 2025 [6] - NVIDIA's price-to-cash flow ratio is 108 57X compared to Palantir's 843 51X with a 2025 growth rate expected at 41 50% versus Palantir's 23 68% NVIDIA's return on equity (ROE) stands at 114 8% far surpassing Palantir's 9 94% [8] - NVIDIA pays dividends with a payout ratio of 2% and a 5 4% increase over the past five years reflecting its strong business model and ability to reinvest earnings into R&D [9] Valuation and Investment Outlook - NVIDIA's shares are more attractively priced trading at 51 45 times trailing 12-month earnings compared to Palantir's significantly higher multiple of 230 14 [14] - NVIDIA is considered a better investment for 2025 due to its established market dominance attractive valuation and resilience in the face of potential AI investment scaling back by companies [10] - Retail traders poured almost $30 billion into NVIDIA shares this year making it the second-most valuable company in the United States [12] - Investors can gain exposure to NVIDIA through ETFs like VanEck Semiconductor ETF (SMH) Columbia Semiconductor and Technology ETF (SEMI) and Strive U S Semiconductor ETF (SHOC) [15] Industry Trends and Competitive Landscape - NVIDIA's Blackwell chip is expected to dominate in 2025 with GPU demand projected to outperform ASIC chips produced by competitors like Broadcom and Marvel [5][6] - Palantir's momentum as a high-growth stock is supported by its significant exposure to the government sector and participation in a consortium with other defense technology leaders [11][13]