One of the fastest-growing stocks in artificial intelligence (AI) over the last year is Palantir Technologies (NASDAQ: PLTR). Its Artificial Intelligence Platform (AIP) brought eye-popping productivity gains to its customers. Investors took notice, as the stock is up by 420% over the last year.

Unfortunately for investors who have recently taken an interest, its forward P/E ratio is 205, and it sells for 96 times sales. Knowing that, three analysts from The Motley Fool have weighed in to determine whether its stock is still worth buying at these levels.

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Is Palantir a repeat lesson from the dot-com era?

Justin Pope: Separating noise from signal is arguably the most challenging aspect of investing.

For Palantir, the noise is a red-hot stock price. Shares of Palantir have risen a mind-melting 1,770% since 2023. In other words, buying the stock up to this point has looked like a genius move. Anyone seeing this, especially on social media, where people aren't always humble, might feel tempted to jump into the stock.

But here is the signal. The stock is rising faster than Palantir's underlying business has grown. Don't get me wrong, I think Palantir is an excellent AI stock, and the company is executing at a high level, particularly since launching AIP two years ago.

It can make a stock appear invincible when prices only go up. However, investors have seen this movie before. Cisco Systems ran to wildly excessive valuations during the infamous dot-com bubble in the late 1990s. It lost most of its value when the bubble burst, and still hasn't revisited its all-time high, a whopping 25 years later.

That doesn't mean that Palantir will suffer the same fate, but check this out. Cisco's P/E ratio peaked at approximately 234, and its price-to-sales (P/S) ratio peaked at around 39. Palantir is even more expensive today than Cisco at its peak.

CSCO data by YCharts

At the very least, it's hard to imagine much more rational upside in Palantir from these levels. Even worse, any market downturn or misfire in Palantir's business could pop that valuation bubble. Investors should tread very carefully around Palantir stock these days.

Amazon's stock history holds a valuable lesson for those worried about Palantir's lofty valuation

Jake Lerch: Here's a sentiment that I often hear: "I love the stock, but it's too late to buy it now."

And while there's nothing wrong with this viewpoint in theory, I've seen it disproven too many times in practice to grant it much weight. Take Amazon, for example.

For years, countless analysts pointed out -- for good reason -- that Amazon's valuation was sky-high. From 1997 through 2000, Amazon's average P/S ratio was around 16. Moreover, the company had no profits -- and therefore no P/E ratio -- until 2003. Once it was making money, Amazon's average P/E ratio over its first five years of profitability was an eye-popping 88.

Yet, investors who bought Amazon -- and held until today -- would be very happy with the results. In fact, $10,000 invested in the stock in 2008 would be worth about $800,000 today.

This is all to point out that valuation isn't everything.

Yes, Palantir is an expensive stock by just about any measure. Its current P/S and P/E ratios are significantly higher than the historical averages I cited for Amazon.

However, that's because Palantir is poised to deliver enormous growth over the next decade or more. The company offers a unique value proposition that appeals to almost every organization. It can deliver efficiency gains for government agencies; it can cut costs for commercial clients. It can even help military and intelligence agencies win wars and prevent terrorist attacks. Simply put, there's very little this company can't do.

Lastly, the nature of AI and data analysis means that Palantir is positioned to benefit from significant network effects and economies of scale as its AI systems improve and the company's overall client list grows. On top of that, its revenue is already growing at a year-over-year rate of 39%, and profits are increasing, as is free cash flow.

That's what gives me confidence to believe it's not too late to buy Palantir stock.

Palantir is a winner for customers, but not investors

Will Healy: When it comes to AI living up to its potential, perhaps no stock outshines Palantir. The company began in 2003 and utilizes AI and machine learning as a national security-focused tool.

However, it was only when Palantir began to benefit from AIP's massive productivity gains that its popularity took off. Anduril Industries had a 200-fold efficiency gain in its ability to respond to supply shortages. A global insurer reduced an underwriting workflow from two weeks to three hours. With results like that, it is little wonder its commercial customer count is up fivefold over the past three years.

Such gains undoubtedly played a role in the aforementioned stock price growth, but regrettably for Palantir bulls, the increases likely do not justify the software-as-a-service (SaaS) stock's valuation, and here's why.

In Q1, revenue of $884 million rose 39% compared to year-ago levels. With that growth, its net income of $214 million surged 103% higher over the same period. Unfortunately, triple-digit growth is not sustainable for even the best of companies, and the current valuation likely prices it for perfection.

That "perfection" is likely not in the cards for Palantir. Analysts forecast revenue growth will slow to 36% for 2025 before falling to 29% in 2026. That is likely to do little to make the 96 P/S ratio more attractive, particularly when the larger and faster-growing Nvidia sells for 24 times sales.

Indeed, Palantir is likely to play a key role in the AI field for years to come. Nonetheless, valuation matters at some point, and investors could find themselves stuck in a losing stock for years to come if the sentiment around the stock starts to turn negative.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Amazon and Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Cisco Systems, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.

The stock market has become highly volatile following President Donald Trump's tariff announcements and heightened trade tensions with China. Stocks had some of their worst sessions since the COVID-19 pandemic five years ago. Yet, as the recent rally -- one of the market's best days ever -- showed, these moments can be great opportunities to buy high-quality stocks at lower prices.

Investors are not out of the woods yet. Although the broader market is currently off its lows, things could remain bumpy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Right now, there are some bargains in the technology sector. Nvidia (NASDAQ: NVDA), Taiwan Semiconductor (NYSE: TSM), and Advanced Micro Devices (AMD) (NASDAQ: AMD) are proven winners down between 27% and 57% from their highs. Three Fool.com contributors circled them as top tech stock buys in this volatile market.

Here are the pitches for each:

Short-term volatility might present a fantastic opportunity for long-term investors

Jake Lerch (Nvidia): My choice is Nvidia. As of this writing, Nvidia is down more than 27% from its all-time high. That means that Nvidia has shed nearly $1 trillion in market cap value in the last three months alone.

Clearly, the stock's decline this year has been severe. Yet, for the savvy investor, it is important to remain clear-eyed about the company's long-term prospects.

Granted, trade uncertainty and fears of a possible recession are hanging over the market, making it difficult to evaluate any company's prospects, let alone Nvidia's. The company is at the forefront of the artificial intelligence (AI) boom, so it's logical to fear that Nvidia's business could slump if the ongoing trade war were to bring on a global recession.

Nevertheless, smart buy-and-hold investing requires investors to set aside the latest headlines, which will come and go, and instead concentrate on the trends that will last. One of those unrelenting trends is the growth of AI. Remember, innovation cannot be stopped. It relentlessly marches on, leaving old forms of technology behind. See the typewriter, the slide rule, and the horse and buggy for proof of this.

So, if Nvidia's core investment thesis (the growth of AI) remains intact, how should investors view its stock right now? In my opinion, the stock looks cheap at current prices.

For example, as of this writing, Nvidia's price-to-earnings (P/E) multiple is 39x. That may seem expensive, but consider the stock's 10-year average.

NVDA PE Ratio data by YCharts. PE Ratio = price-to-earnings ratio.

As you can see, Nvidia's 10-year average P/E ratio is 60x. What's more, over the last five years, Nvidia's P/E ratio has dipped below this average only a few times, most of which were during the bear market of 2022.

So, for investors who still believe in AI's long-term growth and Nvidia's role in the next chapter of innovation, right now seems like a smart time to consider Nvidia stock.

It's hard to pass on Taiwan Semiconductor, even amid rising tensions between the U.S. and China

Justin Pope (Taiwan Semiconductor): Investors love semiconductor stocks for a good reason. Chips are essentially the building blocks of technology, making AI and other new industries possible. Taiwan Semiconductor could be my favorite stock to profit in a world constantly demanding more chips.

You may not know it, but most chip companies, like Nvidia, don't build their chips. Instead, they outsource to foundries (companies that manufacture chips). Taiwan Semiconductor is the world's leading foundry, and it's not even close. Counterpoint Technology Market Research estimates that Taiwan Semiconductor manufactured approximately 67% of the world's chips in the fourth quarter of 2024, up from 58% in mid-2023. In other words, Taiwan Semiconductor is pulling away from its competitors.

Taiwan Semiconductor's dominance gives it competitive advantages. It has higher production capacity and the best equipment, meaning it's the clear choice for most chip designers, especially high-end chips like those Nvidia is selling for AI data centers. Taiwan Semiconductor should remain busy for the foreseeable future as AI grows and new industries, including humanoid robotics and self-driving vehicles, continue to fuel robust chip demand.

The caveat with Taiwan Semiconductor is its proximity to China, which has long claimed Taiwan as a province. The escalating China-U.S. tensions could shine an uncomfortably bright spotlight on Taiwan Semiconductor, a strategic chess piece for the U.S. The company has expanded into America and Europe, but the situation is still complicated.

While owning the stock comes with geopolitical risks, Taiwan Semiconductor's valuation could be too compelling to ignore. The stock's P/E ratio has slipped to less thanr 22, a steal for a dominant business that analysts believe will grow earnings by nearly 30% annually over the long term. Assuming geopolitical tensions don't boil over, Taiwan Semiconductor should make buyers at these levels very happy.

The pullback in this diversified chip company is likely overdone

Will Healy (Advanced Micro Devices): Investors may not know what to make of AMD. The company is a leader in central processing units (CPUs) and GPUs, fueling its success in the gaming and PC segments. While its data center segment has also experienced rapid growth, it lags far behind market leader Nvidia in the AI accelerator market. Additionally, AMD's embedded segment is coming out of a downcycle.

At the same time, gaming has suffered since Microsoft and Sony have not updated their gaming consoles in years. More recently, concerns about tariffs and worries over price wars with Intel have further spooked investors.

Amid that news, investors have primarily focused on the negative, and AMD stock recently traded at 57% below its all-time high in March 2024.

Still, investors have plenty of reasons to expect a recovery. For one, the data center and client (PC) segments grew revenue in 2024 by 94% and 52%, respectively. That allowed AMD to increase its overall revenue by 14% during the year.

With more muted declines in the embedded sector and optimism about gaming, these business segments are finally coming out of a downcycle. Thus, analysts forecast revenue growth of 23% in 2025, leaving it on track for higher growth despite concerns about the company.

Its forward valuation also seems to confirm that the selling is overdone. The P/E ratio of almost 100 appears elevated as some business segments come out of a downcycle. Nonetheless, the forward P/E ratio of approximately 20 essentially makes AMD a value stock if current trends continue.

Admittedly, catching up to Nvidia in the data center market appears unlikely, and tariff worries add to uncertainty. Still, one cannot dispute that AMD has rapidly grown its data center revenue despite challenges. Moreover, with its lagging segments coming out of a downcycle, investors should consider taking advantage of the discounted stock price and low valuation.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

Now, it’s worth noting Stock Advisor’s total average return is 796% — a market-crushing outperformance compared to 155% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Jake Lerch has positions in Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy has positions in Advanced Micro Devices and Intel. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.