AI Superstars Nvidia and Palantir Are Teaming Up. Here's Which Stock I'm Buying Now.

Core Insights - Nvidia and Palantir are significant players in the AI sector, with Palantir focusing on software and Nvidia on hardware, and they have recently formed a partnership that is expected to benefit both companies [1][2]. Company Analysis Palantir Technologies - Palantir's business model is subscription-based, leading to a sustainable revenue stream as customers are likely to continue using its AI-powered data analytics software due to its integration into their operations, making it "sticky" [3]. - Palantir is currently valued at a high premium, trading at 224 times its projected 2026 earnings, which raises concerns about its stock valuation despite its growth potential [11]. - For Palantir to achieve a more reasonable valuation of 50 times trailing earnings, it would need to sustain a compounded annual growth rate (CAGR) of 50% over the next five years, resulting in annual revenue of $26 billion and a market cap of $457 billion, which leaves limited room for growth given its current market cap of approximately $450 billion [12]. Nvidia Corporation - Nvidia's business model relies on the continuous sale of new GPUs, and it has been successful in releasing new iterations annually that outperform previous models [5][6]. - Nvidia is expected to experience significant revenue growth, with global data center capital expenditures projected to increase from $600 billion in 2025 to between $3 trillion and $4 trillion [13]. - Nvidia's stock is considered more reasonably priced, trading at about 30 times next year's earnings, making it a more attractive investment compared to Palantir [11].