Shares of Palantir Technologies(NYSE: PLTR) and Nvidia(NASDAQ: NVDA) have skyrocketed 223% and 194%, respectively, this year, as of Nov. 6 amid strong demand for artificial intelligence (AI). That makes them the second-best and third-best performing members of the S&P 500 behind electric utility Vistra.
Interestingly, Ken Griffin’s Citadel, the most profitable hedge fund in history as measured by net gains since inception, has been buying one stock and selling the other aggressively.
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Griffin purchased 4.6 million shares of Palantir through the first half of 2024, increasing his stake by 452%.
Griffin sold 33.9 million shares of Nvidia through the first half of 2024, slashing his stake by 93%.
Palantir and Nvidia are both well-positioned to benefit as the artificial intelligence boom builds momentum, but investors need to consider valuation in both cases. Here are the important details.
Palantir specializes in data analytics software. Its primary products, Foundry and Gotham, let businesses integrate data, develop machine learning (ML) models, and interact with those digital assets through prebuilt and custom analytical tools that improve decision-making. Its Artificial Intelligence Platform (AIP) enhances Foundry and Gotham by adding support for large language models and generative artificial intelligence.
In August, Forrest Research recognized Palantir as a leader in AI/ML platforms. AIP ranked above every other product on the market for its current capabilities, though Alphabet‘s Google received the highest score for its growth strategy. Principle analyst Mike Gualtieri commented, “Palantir is quietly becoming one of the largest players in this market.”
Palantir reported encouraging financial results in the third quarter. Its customer count climbed 39% to 629, and the average existing customer spent 18% more. In turn, revenue jumped 30% to $726 million, marking the fifth consecutive sequential acceleration, and non-GAAP earnings increased 43% to $0.10 per diluted share. But Palantir has a serious problem with its exorbitant price tag.
Among the 22 analysts who follow Palantir, just 27% rate the stock a buy. Wall Street estimates its adjusted earnings will increase by 29% over the next 12 months. That consensus makes the current valuation of 157 times adjusted earnings look absurd.
Rishi Jaluria at RBC Capital recently called it “unsustainable,” and I’m inclined to agree. Prospective investors should avoid this stock, and current shareholders should think about selling a few shares, even though Ken Griffin’s Citadel was a buyer throughout the first half of the year.
Nvidia is best known for its dominance in data center graphics processing units (GPUs). It accounted for 98% of data center GPU shipments last year and holds 90% market share in artificial intelligence chips, according to Morgan Stanley analyst Joseph Moore. But the company is truly a force to be reckoned with because its dominance is built on software and protected by an array of adjacent hardware.
To elaborate, Nvidia introduced its CUDA software in 2006, laying the foundation for its current data center dominance. Today, CUDA comprises hundreds of software libraries that streamline the development of AI applications across use cases ranging from recommender systems to robotics. “That breadth effectively makes Nvidia the go-to platform for AI developers,” according to The Wall Street Journal.
Additionally, Nvidia recently debuted its first central processing unit (CPU) for data center servers and has secured a leadership position in AI networking equipment. The breadth of its hardware portfolio affords the company yet another advantage. Nvidia can essentially design entire data centers, which lets the company build systems with a lower total cost of ownership, according to CEO Jensen Huang.
Nvidia reported strong financial results in the second quarter of fiscal 2025 (ended July 2024). Revenue rose 122% to $30 billion on strong demand for AI. Meanwhile, non-GAAP net income increased 152% to $0.68 per diluted share. “Nvidia achieved record revenues as global data centers are in full throttle to modernize the entire computing stack with accelerated computing and generative AI,” said Huang.
Among the 65 analysts who follow Nvidia, 92% rate the stock a buy. Wall Street expects the company’s adjusted earnings to increase 54% over the next 12 months. That makes the current valuation of 65.6 times adjusted earnings look reasonable.
Investors should feel comfortable buying a small position in this stock, even though Ken Griffin’s Citadel was unloading shares during the first half of the year.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
