Prediction: 1 AI Stock Will Be Worth More Than Palantir Technologies by Year-End in 2025

Palantir Technologies Performance - Palantir Technologies was the best-performing member of the S&P 500 in 2024, with its share price surging 340% last year due to growing demand for its artificial intelligence platform [1] - The company has grown into a $181.9 billion business [1] Arm Holdings Potential Growth - Arm Holdings is currently worth $148 billion, and its stock price would need to advance 23% to $174 per share for its market value to hit $182 billion [2] - Wall Street analysts have set target prices supporting this prediction, with Morgan Stanley at $175, Evercore at $176, Bank of America at $180, and Loop Capital at $180 per share [9] - If Arm's earnings grow 33% over the next four reports, its share price could increase 23% to $174, bringing its market value to $182 billion, surpassing Palantir's current market value [10] - In a bull-case scenario outlined by Morgan Stanley, Arm's stock could hit $300 per share before the end of 2025, implying 112% upside from its current share price of $141 [11] Arm's Business Model and Market Position - Arm designs central processing unit (CPU) architectures and licenses the intellectual property (IP) to customers, earning revenue through licensing and per-unit royalties [4] - The company also provides related technologies like systems IP and software development tools, simplifying application development on Arm-based chips across domains like AI, robotics, and scientific computing [5] - Arm chips are more power-efficient than competing processors built on the x86 architecture, with 99% market share in smartphones and a six percentage point increase in data center market share over the last two years [6] - The three largest public clouds (Amazon Web Services, Google Cloud, and Microsoft Azure) have designed Arm-based chips for their data centers, and ten of the world's largest hyperscalers are developing and deploying Arm-based chips [7] - The Nvidia Grace-Blackwell superchip, which pairs Nvidia GPUs with Arm CPUs, is expected to be highly successful, benefiting Arm through per-chip royalties [7] Arm's Growth Prospects and Valuation - Wall Street expects Arm's adjusted earnings to grow at 33% annually through fiscal 2027, making the current valuation of 104 times adjusted earnings look expensive [9] - Arm has consistently beaten consensus forecasts in recent quarters, suggesting Wall Street may be underestimating its growth trajectory [10] - The company's energy-efficient chips could be an attractive source of cost-savings for enterprises investing in AI systems, which require a tremendous amount of electricity [8]