Key Points

• Many companies in the center of the AI revolution have seen their stock prices soar in the last three years.

• These two companies have produced very strong operating results.

• But their stock prices have outpaced their financial growth, leading to sky-high valuations.

• 10 stocks we like better than Palantir Technologies ›

Artificial intelligence (AI) has become one of the biggest talking points for businesses over the last few years. The number of S&P 500 companies mentioning "AI" on their earnings call climbed from less than 75 in 2022 to 241 during the first quarter, according to FactSet Insight.

A handful of companies have built big businesses around demand for artificial intelligence, or integrated AI to rapidly expand their addressable markets. Many of those companies have seen their stock prices soar over the last few years.

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But not every high-flying AI stock is worth buying after a massive run up in its price. Wall Street analysts have soured on two of the strongest performers over the last few years. Some analysts now see tremendous downsides ahead.

Here are two AI stocks that could plummet over the next year, according to select Wall Street analysts.

1. Palantir Technologies (74% potential downside)

Palantir Technologies (NASDAQ: PLTR) has been one of the best-performing stocks over the last few years. Since the start of 2023, the stock price has climbed an eye-popping 2,290%, and it now trades with a market cap exceeding $350 billion, as of this writing.

But multiple analysts think the stock has climbed too far, too fast. Just seven analysts covering the stock rate it a buy or the equivalent. Seventeen say to hold it, and Palantir has four sell ratings. The lowest price target on the Street is RBC's Rishi Jaluria, who has a $40 price target on the stock, a 74% drop from its current price.

The reason for the low price target isn't lack of financial results. Palantir has seen its revenue grow substantially over the last few years, as it expands its addressable market through its Artificial Intelligence Platform, or AIP. The new platform makes it easier for users to interact with the big data software and find useful business insights and help make decisions. That's expanded the use cases for Palantir's software, especially as businesses generate more and more data. As a result, Palantir's U.S. commercial revenue has climbed quickly, including a 71% increase in the first quarter.

Moreover, Palantir has exhibited tremendous operating leverage. Instead of focusing on marketing and sales, CEO Alex Karp has put most of Palantir's manpower into building a better product. The idea is a better product will do the selling for itself. As a result, adjusted operating margin climbed to 44% in the first quarter, up from 36% in the first quarter last year.

Indeed, Palantir is firing on all cylinders. But Jaluria and many others on Wall Street think the valuation of the stock has climbed too high. "We cannot rationalize why Palantir is the most expensive name in software. Absent a substantial beat-and-raise quarter elevating the near-term growth trajectory, valuation seems unsustainable," he said.

Shares of Palantir currently trade for 228 times forward earnings and 78 times revenue expectations over the next 12 months. To put that in perspective, only a handful of S&P 500 stocks trade for more than 100 times earnings, and no others trade for more than 26 times sales expectations. Meanwhile, there are other companies growing sales even faster than Palantir, so it's a very hard multiple to justify.

2. CrowdStrike (26% potential downside)

CrowdStrike (NASDAQ: CRWD) has seen its share price climb 352% since the start of 2023 on the strength of its Falcon security platform. Despite a massive outage that shut down numerous IT systems around the world last July, the company has bounced back quickly. The stock has more than doubled since its lows last summer, reaching a market cap of nearly $120 billion.

But analysts are starting to look at CrowdStrike's stock with an increasingly critical eye. The stock received three downgrades this month from buy to hold, and one analyst initiated coverage with a hold as well. Over the last three months its buy ratings on Wall Street dropped from 41 to 31. And the lowest price target among them is $350, implying a 26% drop from the price as of this writing.

Again, valuation appears to be the biggest concern for the stock. Operationally, CrowdStrike has managed to grow its customer base as more enterprises look to consolidate their cybersecurity needs and opt to use CrowdStrike's broad portfolio of services. Forty-eight percent of its customers now use at least six of its modules, as of the end of the first quarter. That's up from 40% two years ago.

CrowdStrike is leveraging AI on its platform with agentic AI capabilities through its new Charlotte platform, which helps take action upon detecting a security threat to button up the vulnerability. That's on top of its machine learning capabilities, which help it detect those threats in the first place. And with a growing customer base, it has more data to ingest into its AI algorithms, giving it a significant advantage over smaller competitors.

CrowdStrike has managed very strong growth over the last few years. Its annually recurring revenue climbed 20% in the first quarter, exceeding its guidance, and management expects that number to accelerate through the rest of the year as more businesses adopt its Falcon Flex platform.

Still, the stock now trades at a price-to-sales ratio of 22 times revenue expectations over the next 12 months. And while that might not seem so expensive compared to Palantir, it makes it the third-highest priced stock in the S&P 500 by that valuation metric. And if you prefer to look at its earnings, it's one of the handful of stocks in the index trading above 100 times estimates, 135 times, to be exact.

While it's possible CrowdStrike or Palantir continue to climb higher from here, it's probably worth taking money off the table at this point and finding better values in the market.

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 $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,063,471!*

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See the 10 stocks »

*Stock Advisor returns as of July 21, 2025

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike and Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Palantir has witnessed a meteoric rise in its share price thanks to the company's successful foray into the artificial intelligence (AI) arena.

• Several respected investors on Wall Street have been applying different approaches when it comes to investing in Palantir, making it hard to discern how "smart money" feels about the company.

• Palantir is trading for a historically high valuation, and broader buying and selling themes from institutional money managers could suggest a sell-off is on the horizon.

• 10 stocks we like better than Palantir Technologies ›

Outside of Nvidia, I'd argue that no other company has benefited from the tailwinds of the artificial intelligence (AI) revolution as much as data mining specialist Palantir Technologies (NASDAQ: PLTR).

Over the last three years, shares of Palantir have gained more than 1,300%. Just this year alone, Palantir stock has rocketed by 97%. To put that into perspective, the S&P 500 and Nasdaq Composite indexes haven't even posted gains of 10% in 2025.

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While it can be tempting to follow the momentum in hopes of more outsize gains, smart investors understand that hope is not a real strategy.

Let's explore the catalysts behind Palantir's generational run, and assess some recent trading activity to help discern whether Palantir stock could be headed even higher.

The unprecedented rise in Palantir

When AI first started to emerge as the next megatrend during late 2022 and early 2023, investors were consistently bombarded with news around big tech's splashy investments in the space. Microsoft plowed $10 billion into OpenAI, the maker of ChatGPT. Both Amazon and Alphabet invested hefty sums into a competing platform, called Anthropic. Tesla was touting its advancements in self-driving cars and humanoid robots. You get the drift -- the AI narrative largely hinged on the moves big tech was making.

But in the background, Palantir was building. In April 2023, the company launched its fourth major software suite -- the Palantir Artificial Intelligence Platform (AIP).

PLTR Revenue (TTM) data by YCharts

As the graph above illustrates, Palantir was a relatively slow-growth, cash-burning enterprise prior to the release of AIP. But since AIP's launch a little more than two years ago, Palantir's revenue has accelerated considerably. On top of that, the company has been able to command improving unit economics underscored by a sweeping transition to positive net income and generating billions in free cash flow.

At the end of 2022, Palantir had 367 total customers. As of the end of the first quarter this year, Palantir boasted 769 total customers. Perhaps even more impressive is that the company's commercial customers (non-government) have risen by more than twofold over the last couple of years.

To me, AIP is serving as a gateway for Palantir to expand its reach beyond federal contracts with the U.S. military, which is what Palantir is best known for. AIP represents a transformational shift as a defense contractor to a more ubiquitous software platform capable of penetrating the private sector, despite relentless competition from larger companies such as Salesforce or SAP.

As a Palantir bull myself, I've been blown away by management's ability to outmaneuver big tech and deliver on lofty growth targets time and again. But as an investor, I can't help but wonder if the company's share price trajectory is sustainable.

Is Wall Street trying to tell investors something?

In addition to analyzing financial trends and operating metrics, investors can augment their due diligence process by listening to how Wall Street analysts talk about a company or even dig into the trading activity of notable investors. Thanks to a nifty tool called a form 13F, investors can access an itemized breakdown of all of the buys and sells from hedge funds during a given quarter.

During the first quarter, famed billionaire investor Stanley Druckenmiller sold out of his fund's Palantir position. In addition, Cathie Wood has been trimming exposure to Palantir in Ark's portfolio as well.

On the flip side, billionaire investors Ken Griffin and Israel Englander both added to their funds' respective Palantir positions during the first quarter. Given these dynamics, it might be hard to discern how Wall Street really feels about Palantir.

I think there are some nuances to point out given the details above. First, both Druckenmiller and Wood have been in and out of Palantir stock in the past -- this is not the first time each investor reduced their exposure to the data analytics darling.

On top of that, I think Griffin's and Englander's activity should be taken with a grain of salt. Both investors run highly sophisticated, multistrategy hedge funds. From time to time, some of this activity may include being a market maker.

Although it may appear bullish that Palantir stock is held in Griffin's Citadel and Englander's Millennium Management portfolios, I wouldn't quite buy that narrative. Neither fund is necessarily known for holding positions for the long term.

Moreover, as a multistrategy fund with a number of different teams and objectives, I think that it's highly likely that Citadel and Millennium have a layered and complex hedge strategy when it comes to owning a volatile growth stock such as Palantir.

Where will Palantir stock be at the end of 2025?

The chart below illustrates institutional buying and selling of Palantir stock over the last few years.

PLTR Shares Bought By Institutional Investors data by YCharts

Given that buying (the purple line) remains elevated over selling (the orange line), this could suggest that Palantir remains a favorite among institutional portfolios. However, as I expressed above, not all hedge funds and money managers have the same strategy. In other words, some of this elevated buying could be part of a broader, more complex trading strategy and less so an endorsement of long-term accumulation.

Over the last few months, Palantir stock has become increasingly more expensive. In fact, the company is trading well beyond levels seen during peak days of the dot-com or COVID-19 bubbles.

While it's impossible to know for certain where Palantir stock will be trading by the end of the year, smart investors know that nothing goes up in a straight line forever.

A good indicator for how investors feel about Palantir's prospects should come after the company reports second-quarter earnings in a couple of weeks. As a reminder, shares fell off a cliff for a brief moment following the company's first-quarter blowout report. Expectations are rising with each passing report, and I would not be surprised to see Palantir stock sell off again -- even if its Q2 results are stellar.

Given the convergence between institutional buying and selling, combined with Palantir's increasingly expensive valuation, I can't help but be cautious at this point. I do think a valuation correction could be in store sooner or later and would not be surprised if shares are trading for a considerably lower price by the end of the year.

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 $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,063,471!*

Now, it’s worth noting Stock Advisor’s total average return is 1,041% — a market-crushing outperformance compared to 183% 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 July 21, 2025

Adam Spatacco has positions in Alphabet, Amazon, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Nvidia, Palantir Technologies, Salesforce, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Palantir's stock price has risen much faster than its business has grown.

• ASML, Salesforce, and IBM all have strong investments in AI.

• 10 stocks we like better than Palantir Technologies ›

Palantir Technologies (NASDAQ: PLTR) experienced a significant rise over the past few years and is now the 24th largest company by market capitalization globally. However, through a combination of factors, I think there could be multiple stocks that pass Palantir over the coming years.

Three that I think have that chance are ASML Holding (NASDAQ: ASML), International Business Machines (NYSE: IBM), and Salesforce (NYSE: CRM), but this list could grow if the market comes to its senses regarding Palantir's stock.

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Palantir's stock appears to be significantly overvalued

Palantir has been on an absolute tear since the start of 2024, rising nearly 800%. However, its revenue only grew 39% year over year in the first quarter, indicating a significant disparity between stock price appreciation and actual business growth.

This shows up in the stock's valuation, which trades for 113 times sales and 244 times forward earnings.

PLTR PS Ratio data by YCharts; PS = price to sales, PE = price to earnings.

Very few companies ever reach this valuation for good reason: It's nearly impossible to live up to expectations. If we use a five-year timeline to examine Palantir's stock, let's make the following assumptions:

• Revenue growth of 40%.
• Profit margin reaches 30%.
• Share count remains flat.

Those are three incredibly bullish assumptions -- the company hasn't achieved 40% year-over-year growth in recent quarters and would have to sustain that for five years. Also, a 30% profit margin would place it among the best software companies, and its current 18% margin is still a considerable distance from that level.

Lastly, management is notorious for issuing a large number of shares to employees, and its share count has increased by 7.3% since the start of 2024, indicating significant dilution.

Regardless, if these heady assumptions could come true, Palantir would generate $16.8 billion in revenue and $5 billion in profits. That's huge growth from today's $3.1 billion in revenue, but it would still value the company at 67 times hypothetical 2030 earnings.

A 67 multiple for forward earnings makes for a very expensive stock, and Nvidia, which is consistently growing faster than Palantir, has only a 38 forward earnings multiple right now.

I think this is a fairly clear-cut case that Palantir is drastically overvalued at today's levels. Even with the most bullish assumptions, Palantir's stock would still appear overvalued five years from now, even if the company achieves incredible growth figures.

As a result, I believe the stock is ripe for a decline, and there are many other stocks (beyond the ones I mentioned) that could surpass Palantir.

This trio has a strong outlook and significantly cheaper prices

ASML is only slightly behind Palantir's $362 billion market cap, with a valuation of $292 billion at the time of this writing. It is a key provider of machinery in chip manufacturing, and it holds a technological monopoly with its extreme ultraviolet (EUV) machines.

As more chip fabrication facilities emerge to support the huge AI demand, the company will experience strong growth, which management has told investors to expect in 2026. As a result, I think ASML could easily surpass Palantir.

IBM is a legacy computing business that's working to make the pivot into AI and quantum computing, which is forecast to see commercial adoption around 2030. If it becomes the go-to for this technology, the stock could be ripe for huge upside from its current $266 billion valuation.

Lastly, Salesforce dominates in customer relationship management software. It's also working to integrate AI into its product and maximize its profitability. Compared to many stocks on the market, it is relatively cheap and is valued at a lower level than the S&P 500, which trades for 23.7 times forward earnings.

IBM PE Ratio (Forward) data by YCharts.

As a final note, all three of these stocks trade for far less than Palantir's hypothetical 2030 valuation, which should be a sign for investors that the stock is unsustainably expensive. There is a near-endless list of stocks that appear to be better investments, and these three are among them.

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 $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,056,790!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 180% 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 July 15, 2025

Keithen Drury has positions in ASML, Nvidia, and Salesforce. The Motley Fool has positions in and recommends ASML, International Business Machines, Nvidia, Palantir Technologies, and Salesforce. The Motley Fool has a disclosure policy.

Key Points

• Palantir's software is experiencing growth in both the commercial and government sectors.

• AI adoption in Europe could accelerate Palantir's growth rate.

• Its frothy valuation prices in well over three years of growth.

• 10 stocks we like better than Palantir Technologies ›

Palantir Technologies (NASDAQ: PLTR) stock has been on an absolute roll in 2025, rising around 100% so far. Few stocks deliver that level of performance in five years, let alone half of one.

As a result of Palantir's performance, it has become one of the most popular stocks to own in the market; however, past performance is no guarantee of future results. Instead, investors need to look ahead to what's next for this artificial intelligence (AI) giant. Three years is a long way away, but what will Palantir's stock price look like at that point?

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

Palantir's growth is two-pronged

Palantir is an AI-powered data analytics software platform that allows its clients to input several data streams into the platform and receive actionable insights. Originally, this software was intended for government use, but it has expanded to the commercial side within the past decade.

As a result of its long history with the government, it has become deeply interwoven throughout the government's workings, making it a challenging product to move away from. Still, that doesn't mean various government entities (both foreign and domestic) aren't expanding their use of Palantir's software. In Q1, government revenue increased by 45% in both the U.S. and worldwide, indicating that the AI-powered government is still being developed.

Although Palantir's government revenue exceeds its commercial revenue, the U.S. commercial segment is growing at the fastest rate. In Q1, U.S. commercial revenue rose 71% year over year, showcasing impressive adoption. However, global commerce sales were weak, mainly due to Europe's slower adoption of AI. That could turn around in the next few years and substantially benefit Palantir's long-term growth.

Companywide, Palantir posted an impressive 39% growth rate during Q1. It will be a tall task to maintain that growth rate for the next few years, but how much higher will the stock price rise if it does?

Even the most bullish Palantir investment thesis has problems justifying today's price

Let's consider an extreme bullish scenario for Palantir's stock to determine its potential upside from today's value. Over the past 12 months, Palantir generated $3.11 billion in revenue. Instead of the current 39% growth rate, let's assume it can accelerate to 50% and sustain this rate over the next three years. If it can do that, Palantir would have $10.5 billion in revenue.

Palantir is also starting to mature as a business, so let's say its profit margin can improve to 30% during that time frame, which would indicate Palantir produced $3.15 billion in profits.

PLTR Profit Margin data by YCharts

That indicates significant growth from today's level, but we're still missing a few key information points to value the stock accurately. Many software companies trade for 10 to 20 times sales and 30 to 50 times earnings. If we give Palantir the benefit of the doubt and use the 20 times sales and 50 times earnings figure, that would give Palantir a stock price of $89 using the price-to-sales ratio, or $67 using the price-to-earnings ratio.

That's far less than today's stock price of about $150. That's what happens when you use actual growth projections to determine a future stock price. Palantir's stock has become unlinked from the actual business, and trades for an incredibly expensive valuation right now.

PLTR PS Ratio data by YCharts

Its current valuation prices in well over three years of growth, which indicates that today's valuation is incredibly frothy.

Investors need to understand this, and either reduce their Palantir position or steer clear of it entirely. Investors shouldn't be surprised if Palantir's stock price is lower three years from now, as Palantir must continue beating expectations or risk being sold off due to its expensive valuation.

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 $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,056,790!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 180% 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 July 15, 2025

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

BigBear.ai (NYSE: BBAI) saw its stock close at $8.22 on Thursday, July 17, marking a significant 15.5% increase. The intraday trading showed notable volatility, ranging between a low of $7.25 and a high of $8.38.

In the context of broader market movements, BigBear.ai's performance outstripped that of key indices. The S&P 500 saw a 0.54% increase, while the Nasdaq Composite rose by 0.74%, indicating that the stock's robust rise was primarily driven by company-specific excitement rather than macroeconomic factors. Among its competitors, Palantir Technologies (NASDAQ: PLTR) and C3.ai (NYSE: AI) recorded more modest gains of 2% and 4.2%, respectively. Despite positive performances from these peer companies, BigBear.ai's 15% climb highlights investor enthusiasm toward its recent strategic partnerships in the United Arab Emirates.

The day's trading volume was approximately 205 million shares, exceeding its 50-day average of 143 million shares and the 200-day average of 96 million shares. This heightened activity suggests increased investor interest, likely spurred by the company's recent advancements and strategic initiatives in defense technology. Overall, BigBear.ai's notable rally reflects growing market confidence in its role within the evolving defense AI landscape, signaling potential for sustained growth.

Should you invest $1,000 in BigBear.ai right now?

Before you buy stock in BigBear.ai, 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 BigBear.ai 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 $674,281!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,050,415!*

Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 179% 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 July 15, 2025

JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.

Key Points

• NRG Energy's utility makeover and strategic acquisitions fuel 2025 gains yet derivatives risks remain.

• Palantir's AI software boom has delivered stunning profits but carries a sky-high valuation.

• 10 stocks we like better than Palantir Technologies ›

As the S&P 500 moves more cautiously in 2025, two companies have distinguished themselves with impressive gains. Palantir (NASDAQ: PLTR), up over 90% on surging AI adoption, and NRG Energy (NYSE: NRG), up roughly 60% (at the time of writing), now sit atop the index as two of its best performers. Both have delivered blockbuster returns, punched above consensus earnings, and unfurled sails to catch the AI tailwinds. But as we head into the back half of 2025, when markets often test even the hottest stories, which of these high-flyers has more juice in the tank?

Let's pull back the curtain and see.

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NRG Energy: Old-school power, modern makeover

NRG's old-school power plants are firing on all cylinders. In Q1, revenue jumped 15% to $8.6 billion -- well above the 10% rise across the utility sector -- as wholesale power prices spiked and retail margins widened. Net income popped 47% to $750 million, and earnings per share (EPS) jumped 83.6% from $1.46 to $2.68, more than triple utility peer Duke Energy's own 22% gain. That kind of upside doesn't come around often in utilities, as the chart below shows.

All of that growth is certainly impressive. But a closer look at its business model may hint at some hidden risks. As the Wall Street Journal recently pointed out, only about 9 % of NRG's $25 billion in assets sits in actual power plants, while a staggering 21% lives in $5.2 billion of commodity derivatives. That's high, especially when you consider that many members of the Philadelphia Utility Sector Index hold under 1% of their net assets in derivatives . While NRG is likely using them to hedge energy prices, the heavy exposure could lead to a painful loss on the bottom line if price moves exceed the company's hedged positions.

But here's an interesting fact: NRG has recently agreed to buy a portfolio of natural gas generation facilities and a virtual-power-plant platform from LS Power for $12 billion. Once closed, the deal will more than double NRG's hard-asset base, which should dilute its derivatives line with physical plants. It won't erase volatility all at once, but it will help move NRG back toward a classic utility profile.

Looking ahead, NRG's transformative $12 billion acquisition could help it capture surging electricity demands from AI data centers, which explains why management is expecting a 14% compound annual EPS growth rate over the next five years . That kind of growth will also support its dividend, which is currently at 1.15%. With new capacity on the horizon and dividends set to climb, there's real upside if the LS integration runs smoothly.

Inside Palantir's AI cash machine

Like NRG, Palantir is riding the AI wave. But while NRG is selling energy that powers data centers, Palantir is selling powerful software that turns that data into battlefield tactics and boardroom decisions.

In Q1, Palantir cranked total revenue up by 39% to $884 million, powered by a 55% leap in U.S. sales and a 71% explosion in commercial contracts. This marks the highest quarterly revenue growth on record and its strongest Q1 growth in four years. The same momentum delivered a blistering 44% adjusted operating margin -- nearly double the roughly 23% operating margin for the tech sector -- and $370 million in free cash flow.

PLTR data by YCharts

Government work still underpins the base, but enterprise bookings now outpace defense deals, with 139 contracts north of $1 million inked this quarter alone. This shift toward enterprise, which close faster, scale more predictably, and carry more recurring revenue, signals that Palantir is building a more stable, higher-margin business less reliant on the ebb and flow of government spending.

While the headlines for Palantir have been growth, growth, growth, its valuation is a bit sobering. Palantir's stock has a forward price-to-earnings ratio (P/E) exceeding 230, about eight times the tech sector's at 29, making it one of the more richly valued stocks you'll find. The premium baked into that price demands near perfect performance every quarter. Miss one large contract or see a competitor undercut pricing, and the valuation could hit a speed bump.

At the same time, AI's incoming tidal wave could add about $15.7 trillion to the global economy by 2030, more than the combined GDP of China and India. Palantir is already at the epicenter, with management forecasting $3.9 billion in full-year 2025 revenue, a 36% improvement from last year. For long-term investors, the only risk is that today's price already bakes in the expected AI boom, leaving scant room for upside.

So: power or data?

This is really a tough call. But if I had to pick just one, I'd go with NRG. On a price-to-earnings basis, NRG's roughly 20 times forward multiple is only a notch above the S&P 500 Utilities Index's norm of 18 times -- hardly egregious for a utility that's reinventing itself for an AI-powered world. And with the LS Power acquisition in the works, NRG seems primed for durable upside without nail-biting risk.

But don't get me wrong. I love what Palantir has done over the last half decade. But that high valuation – yikes. If you can stomach that valuation, Palantir could still spark fireworks. But if you want more upside, NRG might be the safer charge.

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 $680,559!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,005,670!*

Now, it’s worth noting Stock Advisor’s total average return is 1,053% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of July 15, 2025

Steven Porrello has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• There is no denying that Palantir has a high valuation.

• However, as a former professional short-seller, I learned to never short a stock on valuation alone.

• Meanwhile, the opportunity in front of Palantir is so large that the company still has strong upside over the long term.

• 10 stocks we like better than Palantir Technologies ›

For several years, I worked as an equity analyst at a long-short hedge fund, with around $600 million in assets under management. While our long book would be larger than our short book, we would be short many more stocks than we would be long in. Typically, we might hold around 15 core long positions, while we could be short more than 70 stocks.

The reason for this was quite simple. On the long side, we typically had a more concentrated portfolio in highly researched names that we had high conviction in. However, shorting individual stocks is inherently riskier, so we would keep individual positions small.

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Since stocks can technically go up indefinitely, you can lose much more than you can make. Meanwhile, if a short goes against you and the stock price goes up, the position size becomes larger, not smaller. This can lead to margin calls, which typically leads to short-sellers being forced to buy back the stock they shorted at a loss.

So why short-sell at all? For one, it's a market hedge. But more importantly, most stocks actually do underperform. According to a JP Morgan Asset Management study, between 1980 and 2020, 40% of stocks in the Russell 3000 index -- which consists of the 3,000 largest U.S. traded stocks -- suffered catastrophic losses of 70% or more from which they never recovered. Meanwhile, 42% of the stocks in the index had negative returns during this period. In addition, two-thirds of stocks underperformed the index.

However, one lesson I learned when looking for stocks to short is never to short on valuation alone.

Palantir and its high valuation

If there was ever a candidate to short solely on valuation, it would be Palantir Technologies (NASDAQ: PLTR). After all, the stock trades at an astonishing 82.5 forward price-to-sales (P/S) multiple. Note that this is sales, not earnings.

However, valuation is not a reason to short a good company without a near-term downward catalyst. The reason for this can be summed up by an old Wall Street adage that is attributed to the British economist John Maynard Keynes: "The market can stay irrational longer than you can stay solvent."

In the context of short-selling, this basically means that a stock can carry high valuation for a very long time, much longer than a short-seller can continue to hold a position.

So, while Palantir's valuation may look extreme, the same could have also been said when it traded at 30 times sales or 60 times sales. After all, at the height of software-as-a-service (SaaS) valuations a few years ago, the average SaaS stock only got up to around a 20 times P/S multiple with over 30% revenue growth.

Meanwhile, the company has been executing strongly. Its revenue growth has accelerated each of the past seven quarters and grew 39% in the first quarter. While high valuations can make a stock more vulnerable to any missteps or disappointments around quarterly earnings, Palantir right now has been firing on all cylinders.

O.K., but would you buy the stock?

Whether to buy Palantir stock is a trickier question to answer, but there is reason to believe that the company could eventually grow to become one of the largest in the world. It started out as a data-gathering and analytics company primarily for the U.S. government, where its technology could be used to discover complex patterns, enabling the government to help track terrorists. But with the advent of artificial intelligence (AI), it has become a major player in the commercial space.

Instead of looking to build a better AI model, Palantir set out to make AI more actionable through its data gathering and analytical capabilities. Its Artificial Intelligence Platform (AIP) gathers data from a variety of different sources and then connects the data to its real-world counterparts. This essentially turns AIP into an operating system where customers use AI models to find solutions to real-world problems.

Today, AIP is being used across an array of industries for remarkably diverse tasks. These include monitoring for sepsis at hospitals, helping a homebuilder streamline its land-development bidding process, and improving the logistics and supply chain of a cereal maker.

The U.S. government uses its technology for mission-critical tasks, including on the battlefield. And even NATO recently signed a big deal with the company.

The breadth of uses for AIP and Palantir's technology is extraordinary and is the reason the company has the potential to grow into one of the biggest in the world.

As such, while I would prefer to buy the stock on a dip given its valuation, I think it has a very good opportunity to be a huge long-term winner.

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 $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% 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 July 7, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase and Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Interactive Brokers is one of the largest digital brokerages, executing roughly 3.45 million trades per day.

• The company recently released data about some of the most active stocks on its platform.

• In today's world of investing, it is important to understand sentiment and which stocks are popular.

• These 10 stocks could mint the next wave of millionaires ›

In today's market, while valuations are important, there are other factors impacting the movement of stocks, such as investment flows and sentiment. Part of this has to do with the rise of exchange-traded funds (ETFs), passive investing, and algorithmic trading. Understanding sentiment is important because it tells investors where flows are focused and what companies could be prone to big moves.

The large brokerage Interactive Brokers recently released data showing the 25 hottest stocks on its platform. The data is from July 8 and examines the preceding five business days. Here are the five most actively traded stocks on the platform.

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 »

1. Tesla

It shouldn't surprise anyone to see Tesla (NASDAQ: TSLA) as the No. 1 stock on the list. The company and its outspoken CEO, Elon Musk, captivated the minds of investors as one of the first companies to make electric vehicles mainstream, and now as a company positioned to commercialize robotaxis and humanoid robots.

Musk's foray into politics this year created lots of controversy as well. With the stock trading at a meteoric valuation, Tesla became a battleground stock. Some think future initiatives like robotaxis and humanoid robots mean the sky is the limit. Others think the stock is a sell, especially with the core EV business struggling this year. While I wouldn't recommend shorting the stock because it has rarely traded on fundamentals, I remain on the sidelines due to the massive valuation.

2. Nvidia

Another obvious stock on this list is the artificial intelligence chip giant Nvidia (NASDAQ: NVDA), which is the largest publicly traded company and recently touched a $4 trillion market cap.

The market clearly thinks AI will revolutionize society as we know it. As the market opportunity gets bigger, investors are likely to keep driving up the price of Nvidia, which is the pre-eminent maker of the graphics processing units (GPUs) that train large language models (LLM).

Trading close to 38 times forward earnings, Nvidia is not that far above its five-year average. But below the surface are questions about the company's ability to maintain its monopoly and keep charging as much for chips as it has been. Nvidia also has other opportunities in autonomous driving and robotics that investors are starting to take notice of. I think investors can keep buying Nvidia but should probably take a dollar-cost averaging approach.

3. Circle

The stablecoin company and issuer of USDC, one of the largest stablecoins, has been quite popular since going public in June. Circle's (NYSE: CRCL) stock has already surged 554% from its initial public offering price of $31 per share.

Stablecoins, which are digital assets pegged to commodities or currencies, are viewed as the next major innovation in payments. Like cryptocurrencies, they have the ability to transfer money anywhere in the world, as long as the person or business has internet access. The associated fees are also lower than traditional payment methods. This makes stablecoins useful for people without access to the traditional banking system and for cross-border payments.

While stablecoins certainly have tremendous potential, Circle seems to have run too far too fast right now. USDC has a nearly $62 billion market cap, and Circle is now at about a $45 billion market cap. Furthermore, lower interest rates could decrease Circle's revenue, which is made by earning yield on the reserve currencies backing its stablecoins.

4. Palantir Technologies

The AI decision-making company Palantir Technologies (NASDAQ: PLTR) has appeared invincible, with its stock up 86% this year. The company's various platforms have the ability to pull in data from a variety of different sources, organize it in a central place, and derive insights using AI and machine learning. Palantir can examine potential scenarios, recommend actions, and then analyze the possible repercussions.

Palantir's platforms are easy to use for people who don't have experience working with LLMs. They can also track how certain data projects were created so they can be easily replicated or taken over by new managers. The company's products have been used by many different government departments and are resonating strongly with the business community as well.

Palantir trades at an even higher valuation than Tesla at 234 times forward earnings. I don't personally buy stocks at these kinds of valuations, but I also do see immense potential for the company. If you buy Palantir, I would once again take a dollar-cost-averaging approach.

5. Robinhood

The online brokerage Robinhood (NASDAQ: HOOD) blasted 138% higher this year, partly due to the crypto boom caused by President Donald Trump's administration's pro-crypto policies. The friendlier regulatory approach will make it easier for Robinhood to sell more cryptocurrencies on its platform, which could draw in more users and drive more activity among the company's existing user base.

As the pioneer of commission-free trading, Robinhood has never had issues bringing users to the platform. But more recently, the company has been able to better monetize users, primarily with the company's monthly $5 Robinhood Gold memberships, which offer users margin investing, competitive yield on brokerage cash, and many trading tools. The company has a very high conversion rate for new users signing up to become Gold members.

The Robinhood Gold Credit Card offers 3% cash back on all purchases, while the company also offers up to a 3% match on annual contributions to a Robinhood individual retirement account (IRA).

All of these features have made Robinhood an attractive place for people to conduct their banking activities. The stock isn't cheap, trading at 63 times forward earnings, but I do think the company has executed well and is driving an intriguing investment story.

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On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Nvidia: if you invested $1,000 when we doubled down in 2009, you’d have $427,709!*
• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $40,087!*
• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $671,477!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, available when you join Stock Advisor, and there may not be another chance like this anytime soon.

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*Stock Advisor returns as of July 7, 2025

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Interactive Brokers Group, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends the following options: long January 2027 $175 calls on Interactive Brokers Group and short January 2027 $185 calls on Interactive Brokers Group. The Motley Fool has a disclosure policy.

Key Points

• Palantir's growth is on fire, but investors may also wonder whether it can continue.

• Reddit stock is once again surging, thanks to its growth and role within the AI ecosystem.

• Netflix has become a cash cow, and the future remains bright.

• 10 stocks we like better than Palantir Technologies ›

The stock market has been somewhat of a roller coaster since President Donald Trump unveiled widespread tariffs on April 2, a day the administration called "Liberation Day."

After some extremely volatile market action, stocks have since stabilized and gone on to challenge new all-time highs. Technology stocks have helped lead the charge. Palantir Technologies (NASDAQ: PLTR) surged 69% since the announcement, followed by Reddit (NYSE: RDDT) at nearly 50% and Netflix (NASDAQ: NFLX) at 36%.

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 »

It's only natural to wonder whether stocks can sustain such impressive momentum.

Three contributing analysts from The Motley Fool tackled these leading technology names one by one to find out. Here is whether you should still buy these tech winners now.

Investors should weigh the valuation of this stock versus its growth potential

Will Healy (Palantir Technologies): Given the power of its Artificial Intelligence Platform (AIP), it may not surprise active tech investors that Palantir rose 69% since April 2.

That gain occurred as the power of its technology became better known to investors, and indeed, one does not have to look far to find AIP's success stories. One insurer reduced an underwriting workflow from two weeks to three hours, while a telecom company utilized it to save money by accelerating the process of decommissioning outdated technologies.

Palantir's financial results also seem to reflect its clients' successes. The company reported 39% yearly revenue growth in the first quarter of 2025, and its Q1 net income increased by 105% over the same period to more than $214 million.

Unfortunately, even with that gain, the company's financials may also indicate its stock is too expensive in the near term.

Palantir's trailing P/E ratio of just over 600 may give investors pause. Also, the forward P/E ratio of more than 230 confirms that the trailing earnings multiple is not an anomaly. The forward one-year P/E ratio, which measures the earnings multiple against next year's estimated earnings, is approximately 185, indicating that the current price already reflects its anticipated earnings gains years into the future.

Whether that valuation makes Palantir stock a "bubble" is a matter of debate. Bubbles are typically not apparent until after the fact, and one could argue that the power of Palantir's technology justifies the stock's valuation. Nonetheless, the chances of it being a bubble are high enough that investors should probably refrain from adding shares.

More importantly, investing is a personal endeavor. If such valuations keep you awake at night, moving your money to lower-cost investments may be a wise decision.

Shares of Reddit advanced by more than 300% since its debut in March 2024

Jake Lerch (Reddit): As of this writing, shares of Reddit have soared by nearly 50% since April 2. That's an excellent run; however, shares have performed even better when viewed on a longer time scale. Since Reddit stock debuted via an initial public offering (IPO) on March 21, 2024, it advanced by more than 300%.

So, what's behind this big move? In short, it's down to Reddit's combination of growth and its role within the artificial intelligence (AI) ecosystem.

Let's start with its growth. After years of existence as a privately held company, Reddit's debut on the stock market brought about a change in its business model. The company increased its efforts to grow its user base, lure advertisers, and increase its revenue.

In its most recent earnings report (for the three months ended March 31, 2025), Reddit reported 108 million daily average users (DAUs), up 31% from a year earlier. While those figures are impressive, Reddit still has plenty of room to grow. Meta Platforms, for example, boasts over 3.4 billion DAUs.

As Reddit scales its user base, revenue -- specifically advertising revenue -- should scale along with it. The company reported $392 million in revenue for the first quarter, up 61% year over year.

Yet, there is a second factor that has analysts and investors excited about Reddit. It is an under-the-radar AI stock. Here's why.

One of Reddit's most valuable assets is the endless stream of content that its user base produces minute by minute. That content is pure gold to AI developers, who are eager to feed it to their AI models, whether the content is scholarly articles on particle physics, silly cat memes, or anything in between. In short, the more data an AI model has access to, the better its output will be.

In turn, Reddit could strike deals to license its content to AI companies. It already has one such deal in place with Alphabet, but additional -- and more lucrative -- deals could follow.

In summary, Reddit's stock is once again surging. Growth-oriented investors would be wise to consider owning shares of Reddit now and for years to come.

Netflix has matured, but the stock still has more to give investors

Justin Pope (Netflix): One stock that continually catches my eye is Netflix, the world's leading streaming service.

The company's journey to the top of the streaming mountain has yielded impressive investment returns; the stock has risen by over 104,000% since 2022. And yet it continues to deliver for shareholders, including roughly 36% returns since Trump's "Liberation Day" announcement three months ago.

Netflix is a different business than it once was. Not only did it transition from disc rentals to a digital platform, but it also invested billions of dollars in developing a catalog of original content, thereby eliminating the need to license shows and movies from its competitors. Today, that strategy is paying massive dividends. Netflix's profit margins have soared over the past decade, since its revenue growth began overtaking the company's content budget:

NFLX Profit Margin data by YCharts

Netflix is a massive company today, worth a whopping $548 billion. Such a large stock won't replicate those prolific past returns. Nevertheless, the company still has room to grow. Its paid subscriber count increased by over 15% year over year in Q4 2024, ending the year with more than 301 million paid subscribers.

Analysts estimate that Netflix will grow its earnings by an average of almost 22% annually over the next three to five years. The stock isn't a bargain, now trading at 51 times 2025 earnings estimates, but it's a reasonable entry point for investors looking to buy, hold, and let Netflix continue to do its thing.

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 $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% 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 July 7, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Jake Lerch has positions in Alphabet and Reddit. 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 Alphabet, Meta Platforms, Netflix, and Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Artificial intelligence investments are finally translating into massive revenue growth and expanding profit margins.

• These three companies offer different ways to profit from the AI revolution at reasonable valuations.

• 10 stocks we like better than Palantir Technologies ›

Investors are starting to grumble about the noteworthy valuations of top artificial intelligence (AI) stocks. However, a closer look reveals those valuations may be bargains in disguise.

Why? The AI gold rush has entered a new phase. What started as speculative hype has transformed into concrete financial results, with revenue growth accelerating and profit margins expanding across the space. While investors worry about stretched valuations, the three companies discussed below are delivering AI-driven growth that justifies premium prices.

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

A core AI holding

Palantir Technologies (NASDAQ: PLTR) posted 39% year-over-year revenue growth in Q1 2025 to $884 million. U.S. commercial revenue, a key driver, surged 71% year over year. Management guided full-year 2025 revenue to a range of $3.89 billion to $3.9 billion, representing approximately 36% growth.

The company highlighted strong AI demand, with both commercial momentum and margins accelerating. In Q1 2025, 55% of Palantir's revenue came from government contracts, providing a stable base. The accelerating commercial growth has led to Palantir trading at premium multiples, often exceeding 250 times forward earnings, which is a valuation level that typically deters traditional value investors.

While CEO Alex Karp's shareholder letters are known for their unconventional style, the company's financial performance, particularly the rapid growth in U.S. commercial revenue and expanding margins, is a primary focus for many investors.

The quiet AI giant

Amazon (NASDAQ: AMZN) doesn't get the AI credit it deserves. While Microsoft Azure and Alphabet's Google Cloud dominate headlines, Amazon Web Services (AWS) has quietly carved out a dominant position in the cloud economy -- and serves as a key backbone of AI infrastructure worldwide.

AWS crossed $100 billion in annual revenue for the first time in 2024, growing 19% to $107.6 billion. More importantly, operating income soared from $24.6 billion to $39.8 billion -- a margin-expansion story hiding in plain sight. The company plans to spend $100 billion on AI infrastructure in 2025 alone.

CEO Andy Jassy sees AWS evolving from a "multi-$100 billion business" to something much larger, as 85% of global IT spending remains on-premises. The AI opportunity accelerates this shift.

AWS already generates billions from AI services with triple-digit growth rates. Trading at under 25 times projected 2027 earnings, Amazon offers compelling risk-reward in cloud AI at a reasonable valuation.

There are 1 billion AI users (and counting)

Meta Platforms (NASDAQ: META) effectively addressed skeptics with its robust Q1 2025 results. The company reported a 16% increase in revenue to $42.3 billion, while earnings per share surged 37% to $6.43, comfortably exceeding analyst estimates.

A key highlight was the rapid adoption of Meta AI, which reached nearly 1 billion monthly active users, underscoring the company's ability to develop and scale consumer AI products globally. AI-driven ad enhancements also contributed meaningfully, lifting the average price per ad by 10%, alongside 5% year-over-year growth in ad impressions.

Meta's commitment to AI leadership is reflected in its planned $64 billion to $72 billion investment in AI infrastructure during 2025. The company's Llama open-source models position Meta uniquely within the AI ecosystem, fostering both developer engagement and commercial leverage. Additionally, the company's Advantage+ suite has demonstrated clear value for advertisers, delivering a 46% lift in incremental conversions during testing.

Despite its scale and aggressive investment, Meta's valuation remains attractive, trading at just 23 times projected 2027 earnings. Coupled with double-digit revenue growth and a wide competitive moat, the stock appears undervalued, relative to many AI-focused peers.

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 $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $980,723!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 179% 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 July 7, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. George Budwell has positions in Microsoft and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The evolution of artificial intelligence (AI) is the hottest thing since sliced bread on Wall Street.

• The irreplaceability of the AI-driven software-as-a-service solutions offered by Palantir have helped propel its stock nearly 2,000% higher since 2023 began.

• Everything from historical correlations to insider activity and valuation make Palantir a potentially dangerous stock to own.

More than 30 years ago, the advent of the internet began captivating the attention of everyday investors. Over these three-plus decades, investors have often had a next-big-thing trend to chase after. At the moment, nothing is garnering more attention than the evolution of artificial intelligence (AI).

When most investors think about AI, semiconductor titan Nvidia probably comes to mind -- and for good reason. Nvidia's graphics processing units (GPUs) have become staples in high-compute data centers. Its Hopper and successor Blackwell GPUs are powering split-second decision-making, generative AI solutions, and the training of large language models, such as chatbots and virtual agents.

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

But the argument can be made that Nvidia's time atop the AI pedestal is over, with AI-driven data-mining specialist Palantir Technologies (NASDAQ: PLTR) dethroning it. Palantir stock has gained nearly 2,000% since 2023 began, and its market cap has grown to $317 billion, as of the closing bell on July 3. It went from a company tech investors somewhat followed to being one of the most-influential tech businesses in the world.

Palantir's success has been fueled by the irreplaceability of the services it offers. Its Gotham platform aids federal governments with data gathering and analysis, as well as military mission planning and execution. Meanwhile, Foundry is relied on by businesses to make sense of their data and streamline their operations. With no one-for-one large-scale replacements for Palantir's AI- and cloud-based software-as-a-service (SaaS) model, its operating cash flow is highly predictable and secure.

Furthermore, Palantir made the turn to recurring profitability well ahead of Wall Street's consensus expectation. Maintaining a rapidly growing moat and validating its competitive edge with recurring profits is a quick way to win over Wall Street and investors.

But what if Palantir's momentous run-up is nothing more than a short-lived FOMO (fear of missing out) event? While this opinion will undoubtedly be unpopular given the riches this company has bestowed on shareholders since 2023 began, there are seven valid reasons to believe Palantir stock can plunge 60%, if not more.

1. Next-big-thing technologies always endure bubbles

One of the biggest challenges for Palantir Technologies is that investors have a terrible habit of overestimating how quickly a game-changing innovation will gain utility and be adopted by businesses and/or consumers.

Including the internet, every next-big-thing technology for more than three decades has endured a bubble-bursting event. This is to say that every innovation has needed time to mature. With most businesses not generating a positive return on their AI investments, nor optimizing their deployed AI solutions, it's a fair assumption that AI is walking down the same path as prior game-changing technologies.

While the multiyear government contracts (via Gotham) and subscriptions (via Foundry) Palantir has earned should keep its sales from plunging if the AI bubble bursts, it'll do nothing to save the company's stock from a wave of negative investor sentiment.

2. Gotham's ceiling is lower than investors realize

To date, Gotham has been the operating platform responsible for driving Palantir's profits and its annual growth rate that typically range between 25% and 35%. Having the U.S. government in its corner has undeniably been a positive.

However, Gotham's client pool is rather limited. Since it provides data collection and military mission planning/execution, Palantir's flagship SaaS model isn't available to China, Russia, and a laundry list of other countries that aren't bona fide allies of the U.S. This significantly lowers Gotham's long-term ceiling more than investors probably realize.

3. The Trump administration's focus on government efficiency is worrisome

For defense-oriented businesses, there's usually no better scenario that a unified Republican government. Historically, the GOP has favored aggressive defense spending, which plays right into the hands of Palantir's Gotham platform. President Donald Trump has previously noted the need to keep domestic AI innovations protected.

But Trump's campaign promise has also been to make Washington, D.C., more efficient. Though the president has been supportive of defense companies in the past, there's little guarantee that the Trump administration won't aim to reduce federal spending in the future. There's also little visibility of what defense spending might entail beyond Trump's four years in office.

4. Palantir's earnings quality is poor

A public company that's added more than $300 billion in market cap over the last 30 months should be absolutely crushing it from a fundamental standpoint. With Palantir shifting to recurring profitability, the expectation is that rapid sales growth in Gotham and Foundry is powering its net income higher. Yet this isn't the complete story.

Last year, 40% of Palantir's $489.2 million in pre-tax income was traced back to interest income on its cash. During the first three months of 2025, 23% of the company's pre-tax income came from interest on its cash. While I'm not faulting Palantir or its management for generating interest income on the company's cash pile, it's important to recognize that a significant chunk of the company's pre-tax income is coming from a non-innovative and unsustainable source.

PLTR Shares Outstanding data by YCharts.

5. Share-based compensation is working against investors

Another reason for investors to pass on Palantir stock is the company's persistent share-based compensation.

Stock-based compensation often serves a purpose. Handing out vested shares, stock options, and so on, encourages talented individuals to stay with a company. Stock-based compensation can also be used as something of a dangling carrot to encourage workers and managers to meet specific growth targets.

Unfortunately, stock-based compensation can have a deleterious impact for shareholders. In the case of Palantir, steadily climbing share-based compensation is increasing its outstanding share count and having a dilutive effect on existing shareholders. While this dilutive effect has, thus far, been masked by AI euphoria and FOMO, history suggests this is highly unlikely to continue for an extended period.

6. Insiders have been persistent sellers for nearly five years

Investors would also be wise to take note of the persistent insider selling activity of Palantir Technologies' stock since its initial public offering (IPO) in September 2020.

Once again, there's a bit of a caveat to this data. Namely, the compensation of executives is often heavily weighted toward shares and stock options, which requires the sale of shares to cover their federal and/or state tax liability. In other words, not all insider selling is necessarily bad news or indicative of management losing faith in their company.

With the above being said, more than $7.4 billion in Palantir stock has been sold since the September 2020 IPO, with former Chief Accounting Officer Heather Planishek's 10,000-share buy in May 2025 being the only executive or director purchase in 57 months.

If executives and directors won't buy shares of Palantir, why should you?

PLTR PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.

7. Palantir's valuation is an unsustainable eyesore

The final piece of the puzzle that explains why Palantir stock can plunge 60% (or more) is its valuation.

Over the last three decades, megacap stocks on the leading edge of next-big-thing trends have historically topped out at price-to-sales (P/S) ratios ranging from 30 to 43. Some of the brand-name companies that fit this definition include Microsoft, Amazon, Cisco Systems, and even Nvidia, based on its peak P/S ratio of 42 last summer.

Palantir stock ended the previous week at a trailing-12-month P/S ratio of more than 107! It's effectively three times higher than other megacap companies before their respective bubbles burst.

Even if Wall Street's consensus sales estimates prove accurate and Palantir's revenue catapults by 263% to $10.42 billion from 2024 to 2028, its current valuation (assuming no share-based compensation) would place it at a lofty P/S ratio of 30 by the end of 2028. This is a historically unsustainable valuation, and it's just a matter of time before Wall Street and investors come to this realization.

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 $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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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. Sean Williams has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Cisco Systems, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The Wedbush analyst calls right now the "golden age" for tech stocks.

• These two players could keep winning well into the future, driven by strong demand for their AI products.

Technology stocks, last year's big drivers of stock market gains, looked as if they were running out of that positive momentum just a few months ago. President Donald Trump announced plans for import tariffs, and investors worried that the move would crush corporate earnings and the general economy. But recent trade talks and deals reached -- including a trade agreement with China -- have eased investors' fears, allowing tech stocks to resume their upward path.

And this trend may be far from over, according to one of the most watched tech analysts. Dan Ives of Wedbush, in an interview with Bloomberg, predicted a strong second half for technology stocks, calling this the "golden age" for the industry. He spoke of artificial intelligence (AI) stocks as having much more room to run and even said we're at "10 p.m. in the AI party that goes to 4 a.m."

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 »

The infrastructure buildout remains ongoing, and on top of this, new phases of AI growth are just beginning or yet to come, from the widespread use of AI agents for applying AI to real-world situations to the launch of humanoid robots. This is why today's AI market, valued at about $300 billion, is forecast to surpass $2 trillion within 10 years.

Against this backdrop, here are two top AI stocks to buy now to potentially benefit from explosive growth as this story develops.

1. Nvidia

Nvidia (NASDAQ: NVDA) has become an AI behemoth over the past few years, thanks to both its leading AI chips, known as graphics processing units (GPUs), and its full selection of AI tools and services. The company has played a key role in the earliest stages of AI, with GPUs powering the training and inference of models. This has helped Nvidia's earnings roar higher. On a quarterly basis, revenue and net income have increased by double or even triple digits.

Now, Nvidia also has what it takes to accompany customers through the rest of the AI adventure. The tech giant has rolled out enterprise software, networking equipment, and AI systems tailored to specific industries. Nvidia is even getting involved in the hot growth area of quantum computing, as it recently announced the construction of a specific research center in Boston.

All this bodes well for ongoing growth, and in addition to this, Nvidia is making an important move to ensure its leadership over time: The company has put the focus on innovation, committing to updating its GPUs annually. Since Nvidia already sells the highest-performance GPUs, it will be difficult for rivals to catch up.

Today, Nvidia shares trade for 36 times forward earnings estimates, down from 50 times earlier in the year. This is a reasonable price now and may even be considered dirt cheap if we imagine where Nvidia may be a few years down the road.

2. Palantir Technologies

Palantir Technologies (NASDAQ: PLTR) soared 340% last year and climbed 80% in the first half of this year -- and it could still have further to go this year and over the long run. That's because the growth story of its commercial business may be in its early days, and the U.S. government's focus on efficiency could result in ongoing solid growth for Palantir's government business.

Palantir sells software that helps customers aggregate their data and use it to make key decisions, gain efficiency, or advance their strategies. The company launched an AI-powered system, its Artificial Intelligence Platform (AIP), two years ago, and since then, demand and revenue have roared higher.

Quarter after quarter, Palantir has reported double-digit revenue growth for both its government and commercial businesses and has successfully balanced growth and profitability. AIP has particularly supercharged the commercial business, with customers growing from a handful just a few years ago into the hundreds today. And Palantir's bootcamp training sessions, which help customers see how AIP can work for them in a matter of hours, have translated into major deals for the company.

Some investors have balked at the idea of buying Palantir at its current valuation, which exceeds 200 times earnings estimates. But as analyst Dan Ives has said, when looking at certain tech stocks, traditional valuation metrics often overlook the story several years down the road. Palantir's growth is going strong, and the company offers customers an easy and efficacious way to apply AI to their businesses -- and that means this AI giant could continue to roar higher in the second half and beyond.

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 $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of June 30, 2025

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Palantir's growth in the government sector has been outstanding.

• The company could receive a significant boost from growing European demand for artificial intelligence (AI).

• However, the stock's valuation has become excessively high.

Palantir Technologies (NASDAQ: PLTR) has been one of the top-performing stocks since the start of 2024, rising nearly 700%. It has also been a top performer in 2025, rising 80% so far. Palantir's business has been booming alongside the artificial intelligence (AI) arms race. With no signs of AI spending slowing down, investors are speculating that Palantir's stock could eventually reach a $1 trillion market capitalization.

Palantir's current valuation hovers around $320 billion, so the stock would need to more than triple to cross that threshold. But can that happen over the next decade?

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 »

Palantir is seeing phenomenal growth in multiple sectors

Palantir offers AI-powered data analytics solutions that help decision makers make the best choice possible. Originally, Palantir began with government clients, but it has also expanded into the commercial sector over the past few years.

Although commercial revenue has grown significantly, government revenue still makes up the majority of Palantir's total revenue. In Q1, government revenue was $487 million, and on the commercial side, it was $397 million. Government revenue is also rapidly increasing, rising 45% year over year. The U.S. government increased at the same rate as international, indicating widespread adoption of Palantir's products worldwide.

However, that story is completely different on the commercial side. U.S. commercial revenue rose 71% year over year in Q1, while overall commercial revenue rose 33%. This indicates global AI adoption (specifically in Europe) lags the U.S., but that story could change over the next few years. That could rapidly accelerate and cause Palantir's impressive 39% growth rate to rise even further.

Palantir bulls point to this as a reason why the stock could reach a $1 trillion valuation by 2035. However, the bears have another key point to consider, and it could derail the entire investment thesis.

Palantir's stock is overvalued

One thing that should raise a red flag for investors with Palantir's stock is its 700% rise alongside its 39% growth rate. Those two figures are completely mismatched, indicating that Palantir's stock might be overvalued.

After evaluating Palantir's price-to-sales valuation, this fact is confirmed.

PLTR PS Ratio data by YCharts

Most software companies trade at a multiple of 10 to 20 times sales. The best companies with rapid growth rates can trade upwards of 30 times sales. However, Palantir's stock is more than three times that level. Achieving nearly 110 times sales is practically unheard of in the stock market, and if a stock ever reaches that valuation, it usually only does so when it's doubling or tripling its revenue year over year. Even then, some of those companies crash from a high valuation.

Even if Palantir gets a boost from rising European revenue, I don't think it's going to be enough to propel its stock to a reasonable level. Multiple years of revenue growth are already baked into the stock price. For Palantir to achieve a still very expensive but far more reasonable price tag of 30 times sales, it would require 363% revenue growth from today's levels.

As a result, I don't think Palantir can triple its stock price over the next decade because it's going to spend the first part of it growing into the extremely high valuation it has now. Investors need to be cautious because high expectations are already baked into the stock price; any misstep could cause the stock to tumble back to reality.

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 $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% 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 June 30, 2025

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Palantir's international commerce growth is lacking.

• Management has a consistent history of underguiding and overdelivering.

• The stock has a couple of years of growth already priced in.

Making projections about where a stock will be in five years isn't easy, but it's required in investing. The foundational idea of investing in stocks is identifying a stock that is currently undervalued and will become more valuable in the future. While some traders may set a price target for a month or a year away, long-term investors prefer to focus on a three to five-year time frame, as it allows the business to succeed and lets the market properly value the stock.

One of the most popular AI stocks in the market is Palantir Technologies (NASDAQ: PLTR). Palantir delivered excellent returns over the past few years, and investors want to know if it's too late to get in. Let's take a look at Palantir's five-year outlook and see if it's a smart buy today. The answer may surprise you.

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

Palantir is showing excellent growth in three of its four segments

Palantir rose to the top of the AI investing world due to its rapid growth and experience in the space. The company began in the early 2000s by offering its AI-powered data analytics software to government entities, but expanded into the commercial sector over the past few years. Government-sourced revenue remains the majority of Palantir's total, but the commercial side is rapidly gaining.

In Q1, Palantir's government revenue increased 45% year over year to $487 million. The growth rate was the same in the U.S. and internationally, indicating that this segment is experiencing healthy growth and adoption worldwide. However, commercial adoption outside the U.S. is slow.

Commercial revenue growth companywide was 33% in Q1, bringing Palantir's total to $397 million. In the U.S. specifically, commercial revenue jumped a whopping 71% and totaled $255 million. This highlights a couple of key facts. First, Palantir's U.S. commercial revenue growth needs to continue at its rapid pace for the stock to keep delivering huge growth. Second, if international commercial revenue starts to accelerate, Palantir's overall growth could really pick up speed.

The biggest region to watch for Palantir's international growth is Europe, which significantly lagged behind the U.S. in AI adoption. However, that could change in the coming years and provide Palantir a second growth catalyst.

Looking ahead in the short term, Palantir's management expects Q2 revenue growth of 38%, a slowdown from Q1's 39% growth. However, investors shouldn't read too much into that, as management has a consistent track record of beating internal expectations. For the full year, it expects revenue of $3.896 billion, representing a 36% increase.

That's still a slight deaccelerating trend, but it could be reversed by increasing international commerce growth. But will that be enough for the stock to deliver strong returns over the next five years?

The stock has incredibly high expectations baked into it

The biggest challenge Palantir's stock faces over the next few years isn't European growth or government revenue; it's the unbelievably high expectations already baked into the stock price. Palantir's stock currently trades for 106 times sales, a level that's practically unheard of for a company growing as "slowly" as Palantir is.

PLTR PS Ratio data by YCharts

I say "slowly" because most companies that achieve a valuation of 100 times sales or greater are at least doubling, if not tripling, their revenue year over year. Palantir isn't even close to that, which raises some red flags.

Most software companies trade between 10 and 20 times their sales, with the best-performing companies reaching a multiple of 30 times sales. For Palantir to return to a still very expensive but far more reasonable 25 times sales, its stock price would have to remain flat and its revenue would have to increase by 422%. Even if we accelerate Palantir's revenue growth from the mid- to high-30% range all the way to 50%, that would take approximately 3.5 years of growth to return to a more sustainable level.

That's nearly all of the five-year period we're examining Palantir's stock for. I believe this indicates how overvalued Palantir's stock is, and I expect the stock to remain relatively flat over the next five years, as nearly all of the growth has already been factored into the stock's price. As a result, I think investors are better off finding other AI stocks that don't have the same expectations built into them.

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 $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% 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 June 30, 2025

Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Key Points

• Archer began Abu Dhabi test flights this week, becoming the first eVTOL manufacturer flying in the Middle East.

• Defense partnerships with Anduril and Palantir Technologies could unlock massive value through acquisition or corporate split.

• With approximately $2 billion in liquidity following White House-backed funding, Archer has the industry's strongest balance sheet.

Wall Street sees Archer Aviation (NYSE: ACHR) as just another electric flying taxi company burning cash while chasing FAA certification. Yes, the risks are real -- certification delays, massive cash burn, fierce competition, and the challenge of scaling a new form of aviation.

But that narrow view completely misses what's really happening here: Archer is quietly building the most valuable defense aviation asset outside the traditional primes -- and a major acquisition or corporate restructuring could soon expose this hidden value. Here's a deeper look at why I think these forces are building to drive a major breakout in the stock in the not-so-distant future.

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

The White House just changed everything

Trading around $10 with a market cap near $5.4 billion at the time of writing (July 1, 2025), Archer has delivered impressive returns, up over 245% in the past three years. But those gains pale compared to what's coming. In June 2025, following President Trump's executive order establishing an eVTOL Integration Pilot Program, Archer raised $850 million at $10 per share, bringing its total liquidity to an industry-leading $2 billion.

This wasn't just another funding round. The White House explicitly aims to establish U.S. "dominance" in eVTOL technology through its new Integration Pilot Program. The timing is perfect -- Archer serves as the Official Air Taxi Provider for the Los Angeles 2028 Olympics, creating a high-profile deadline for commercial deployment.

CEO Adam Goldstein called the executive order a "seminal moment" -- and he's right. Unlike competitors burning through capital with single-market strategies, Archer's dual approach and $2 billion war chest provide multiple paths to profitability.

While well-funded competitors like Joby Aviation (NYSE: JOBY) pursue both civilian and military markets, Archer has assembled something unique: an exclusive defense partnership combining its hybrid-electric vertical takeoff and landing (eVTOL) technology with Anduril's autonomous systems and Palantir Technologies' (NASDAQ: PLTR) artificial intelligence (AI) infrastructure. This triumvirate represents a $100 billion-plus opportunity that doesn't require FAA certification.

The defense disruption play

Yes, both Archer and Joby have defense contracts. But Archer's approach is fundamentally different. The late-2024 Anduril partnership creates a hybrid-propulsion aircraft specifically for military use -- not adapted civilian aircraft. This matters because hybrid systems offer extended range and payload capacity that pure electric vehicles can't match right now.

More importantly, Anduril brings its Lattice AI platform, already integrated into hundreds of military systems. Combined with Palantir's March 2025 partnership for AI-powered aviation software, Archer offers the Pentagon something unprecedented: a fully integrated, AI-enabled vertical lift capability from three of defense tech's hottest companies.

The partnership targets a "program of record" -- Pentagon-speak for guaranteed multiyear funding. These contracts can reach billions annually. With defense demand "stronger than expected," according to Goldstein, the company aims to build early hybrid-propulsion defense prototypes soon, distinct from its Midnight commercially oriented aircraft.

The split scenario unlocks everything

Here's where it gets interesting. Archer could unlock massive value through a corporate split, separating its commercial and defense operations. This solves multiple problems at once: Stellantis, with its substantial stake in Archer, wants to focus on commercial air mobility -- not get entangled with defense contractors. A split allows the commercial division to pursue the $1 trillion urban air mobility market with Stellantis and United Airlines, backed by the White House pilot program.

Meanwhile, the defense division -- supercharged by Anduril and Palantir -- becomes an attractive acquisition target for Northrop Grumman (NYSE: NOC) or other defense primes. Northrop has explicitly prioritized AI, autonomous systems, and next-generation aviation. The aerospace giant's Orbital ATK acquisition ($9.2 billion total in 2018) proved its ability to integrate cutting-edge aerospace assets, expanding capabilities in solid rocket motors, missile systems, and space technologies.

Multiple paths to value

Archer isn't waiting for corporate action. The company delivers its first piloted Midnight aircraft to Abu Dhabi Aviation this summer. Manufacturing has begun at its Georgia facility, targeting two aircraft per month by year-end. The Palantir partnership adds another layer, developing AI-powered air traffic systems worth billions.

With a pro forma liquidity position of $2 billion, Archer has industry-leading financial resources to execute on both opportunities simultaneously. Wall Street still prices it primarily as a pre-revenue eVTOL company, largely ignoring its defense potential. But with Anduril recently beating Boeing for major contracts and White House backing, the market's dismissive attitude is changing.

When investors recognize Archer's transformation from flying taxi company to critical defense asset, today's $10 stock will look like the bargain of the decade. After all, defense stocks tend to sport premium valuations and stellar free cash flows.

Should you invest $1,000 in Archer Aviation right now?

Before you buy stock in Archer Aviation, 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 Archer Aviation 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 $697,627!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $939,655!*

Now, it’s worth noting Stock Advisor’s total average return is 1,045% — a market-crushing outperformance compared to 178% 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 June 30, 2025

George Budwell has positions in Archer Aviation, Joby Aviation, Northrop Grumman, and Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Artificial intelligence (AI) is the defining technological innovation of our era. In just a few short years, AI is expected to reshape every corner of society.

Semi-autonomous robots may soon handle your laundry, then hop in a self-driving car to pick up groceries. Life is about to get radically different -- ideally, for the better.

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 »

At the center of this so-called Fourth Industrial Revolution is Nvidia (NASDAQ: NVDA), the leading supplier of AI chips powering everything from data centers to robotics. Thanks to its central position within the AI value chain, Nvidia's stock has delivered a remarkable 829% return over the past 36 months, turning a $10,000 investment into $92,880.

As incredible as that sounds, Palantir Technologies (NASDAQ: PLTR) has done even better. Over the same 36-month period, Palantir has returned an astonishing 1,744%, transforming that same $10,000 investment into $184,370, nearly double Nvidia's impressive gains.

Both companies are riding the same tidal wave -- but in different lanes. Nvidia builds the computational engine, while Palantir delivers the software layer that interprets the data and enables real-world decisions.

Which of these top innovation stocks is the better buy as a core AI holding?

Latest financial metrics

Nvidia's Q1 fiscal 2026 results (ended April 27, 2025) showcased both massive scale and new headwinds. Revenue hit $44.1 billion, up 69% year over year, with data center revenue specifically climbing 73% to $39.1 billion.

Still, the China situation is deteriorating rapidly. Nvidia lost $2.5 billion in H20 revenue in Q1 and expects to lose $8 billion in Q2 from new export licensing requirements. CEO Jensen Huang lamented that "the $50 billion China market is effectively closed to us," with market share in the country falling from 95% to 50% under these restrictions.

Palantir, meanwhile, is hitting "escape velocity." Q1 2025 revenue of $884 million grew 39% year over year, accelerating from previous quarters. U.S. revenue surged 55% to $628 million, with U.S. commercial revenue exploding 71% to $255 million, surpassing a $1 billion annual run rate for the first time in company history. Palantir also raised full-year 2025 guidance to $3.89 to $3.9 billion, representing projected annual growth of about 36% year over year.

Market opportunity and positioning

The global AI market is projected to surpass $826 billion by 2030, even on conservative estimates. Within this vast opportunity, Nvidia and Palantir Technologies occupy distinct positions along the AI value chain.

Nvidia leads the infrastructure layer, powering the compute backbone of AI. CEO Jensen Huang projects annual data center spending could exceed $1 trillion by 2028.

The company is evolving from a chipmaker into a builder of AI factories, with new partnerships to construct AI supercomputers across the U.S., Saudi Arabia, the UAE, and Taiwan. Its Blackwell Ultra architecture and DGX SuperPOD systems place Nvidia at the forefront of "agentic AI reasoning" -- a key step toward the emergence of autonomous, intelligent systems.

Palantir, by contrast, operates in the application layer, helping enterprises deploy AI across real-world use cases. CEO Alex Karp described the company as being "in the middle of a tectonic shift," as demand for large language models has "turned into a stampede." Unlike many AI companies focused on research or infrastructure, Palantir is already monetizing AI through government contracts and commercial deployments, giving it a practical foothold in the race to bring AI into everyday operations.

The valuation disconnect

Despite commanding massive revenue and leading the AI infrastructure space, Nvidia trades at 46 times trailing earnings, well below its five-year average price-to-earnings ratio (P/E) of 78. Its forward P/E of 30 suggests the market is accounting for China-related export risks and a natural deceleration in growth from its enormous base.

Palantir, by contrast, trades at valuation levels that challenge traditional metrics. The stock has a trailing P/E exceeding 600 and a forward ratio exceeding 230.

These elevated multiples reflect investor belief that Palantir is at a key inflection point. The market appears to be betting on the company's ability to sustain hypergrowth while expanding its margins, a high bar that leaves little room for missteps.

PLTR P/E Ratio data by YCharts.

The verdict

Palantir stock has been a phenomenal performer, but at 600 times earnings, perfection is already priced in. Any execution slip or slowdown in growth could prompt a sharp repricing. While its $3.9 billion revenue run rate is expanding rapidly, it remains relatively small, compared to the multitrillion-dollar AI market.

Nvidia offers a more compelling risk-reward profile. At 46 times earnings, roughly 40% below its recent historical average, the stock combines reasonable valuation with several powerful growth catalysts. The Blackwell product cycle is just beginning, and robotics -- a largely overlooked segment -- could become a significant driver over the next decade.

Palantir remains a compelling long-term growth story, but its current valuation demands flawless near-term execution. In this match-up, Nvidia stands out as the stronger core AI investment.

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 $659,171!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $891,722!*

Now, it’s worth noting Stock Advisor’s total average return is 995% — a market-crushing outperformance compared to 172% 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 June 9, 2025

George Budwell has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.

What's the hottest mega-cap stock on the market right now? Palantir Technologies (NASDAQ: PLTR). Shares of the artificial intelligence (AI)-powered software provider have skyrocketed more than 70% year to date. No other stock with a market cap of at least $200 billion has delivered anywhere close to that gain.

While many investors have hopped aboard the Palantir bandwagon, Warren Buffett isn't one of them. Don't expect the multi-billionaire to become a fan of the stock anytime soon, either. Here are three reasons why Buffett wouldn't touch Palantir stock with a 10-foot pole.

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

1. Palantir isn't in Buffett's wheelhouse

I seriously doubt that Buffett has even looked at Palantir's financials. Why? The company's business isn't in Buffett's wheelhouse.

The legendary investor was asked at Berkshire Hathaway's annual shareholder meeting last month if he anticipated being able to put the conglomerate's hefty cash stockpile to use soon. Buffett replied that he'd be willing to invest $100 billion in a company if it met several criteria. First on the list was that he understands the business.

Granted, Berkshire's portfolio has included software companies in the past. Snowflake is a great example. However, CNBC noted shortly after Berkshire invested $800 million in the AI cloud software provider, "It's widely speculated that Buffett lieutenants Todd Combs and Ted Weschler orchestrated the Snowflake bet." I think it's a safe bet that this take is correct.

Buffett has readily acknowledged that he doesn't understand AI. I suspect Palantir's AI-focused business is enough reason by itself for the legendary investor to avoid buying any shares.

2. Buffett couldn't reasonably estimate Palantir's earnings growth

Let's suppose, though, that Buffett didn't shy away from investing in Palantir because of its business. I still don't think he would buy the stock for another critical reason: He couldn't reasonably estimate the company's long-term earnings growth.

Buffett wrote to Berkshire Hathaway shareholders in 2014 that his first step in evaluating a stock (or business) he's considering buying is to try to estimate its future earnings for at least the next five years. He stated, "If, however, we lack the ability to estimate future earnings -- which is usually the case -- we simply move on to other prospects."

I seriously doubt that Buffett would be able to project Palantir's earnings growth because so much of the company's business stems from U.S. government contracts. How much federal money Palantir might receive depends in large part on which way the political winds are blowing over the next few years. Buffett's nickname is the "Oracle of Omaha," but even he probably wouldn't try to predict what will happen in Washington, D.C.

3. Buffett would find Palantir's valuation shocking

Buffett studied under Benjamin Graham, who is widely recognized as "the father of value investing." Although Buffett isn't as much a purist value investor now as he was in the past, he still looks closely at stock valuations before investing.

I'd bet that Buffett would find Palantir's valuation shocking. Actually, I think many investors would find it shocking. We're talking about a stock that trades at roughly 103.9 times trailing 12-month sales and more than 238 times forward earnings.

The only way those metrics would be justifiable is if Palantir were generating truly spectacular growth. To be sure, the company is growing rapidly -- 39% year over year in the first quarter of 2025. But is this growth rate sustainable? Probably not. Palantir's own revenue guidance for full-year 2025 reflects expected somewhat slower growth of around 36%. The consensus Wall Street estimate is for even more of a slowdown in revenue growth next year.

Could I be wrong that Buffett wouldn't touch Palantir stock with a 10-foot pole? Maybe. But with the AI software company's stratospheric valuation, I'd be comfortable making it a 20-foot pole.

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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See the 10 stocks »

*Stock Advisor returns as of June 2, 2025

Keith Speights has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway, Palantir Technologies, and Snowflake. The Motley Fool has a disclosure policy.

Two stocks that have been at the center of financial news stories throughout the year are data mining specialist Palantir Technologies (NASDAQ: PLTR) and health insurance giant UnitedHealth Group (NYSE: UNH).

The reasons these two companies are fetching so much attention, however, couldn't be more opposite.

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Palantir has emerged as a darling of the artificial intelligence (AI) revolution. As of this writing (June 5), shares of the stock have gained nearly 60% on the year -- making it one of the top performers in the S&P 500 and Nasdaq-100 indexes.

By contrast, UnitedHealth Group stock is the worst-performing name in the Dow Jones Industrial Average -- with shares plummeting by more than 40%.

Is now the time to hop on the Palantir train, or should investors take an inventory check on UnitedHealth and choose to buy the dip?

Palantir is on a run for the ages

It's been just over two years since Palantir released its Artificial Intelligence Platform (AIP), a software suite that's proven to be a transformative game changer in the company's pursuit of competing with the largest players in the tech landscape.

PLTR Revenue (Quarterly) data by YCharts

Since releasing AIP, Palantir has unlocked a new wave of revenue acceleration -- thanks in large part to the company's impressive penetration of the private sector. For most of its history, Palantir relied heavily on government contracts from the Department of Defense (DOD).

While deals with the U.S. Military and its allies are still an important cornerstone of Palantir's business, AIP has helped the company break ground in a host of other use cases -- financial fraud, supply chain and logistics, aviation, and much more.

What might be most impressive about Palantir's transformation over the last two years is how rapidly the company transitioned from a cash-burning operation to one that generates consistent profitability. Not only is Palantir acquiring new business, but it's also monetizing these customers in a profitable way. That's a lucrative combination, indeed.

The one idea that's paramount for smart investors to understand is that while Palantir's business is soaring, so is the company's share price. As of this writing, Palantir trades at a price-to-sales (P/S) ratio of 97.

Not only is that magnitudes higher than any of its peers in the software realm, but it is historically high compared to what investors witnessed during the dot-com bubble in the late 1990s.

I don't think I'm the only one who has noticed the pronounced valuation expansion in Palantir, either. Consider that Cathie Wood's Ark Invest portfolio has been trimming Palantir stock as of late, and billionaire money manager Stanley Druckenmiller completely dumped his firm's stake in the AI stock during the first quarter.

UnitedHealth Group can't seem to get out of its own way

UnitedHealth Group's coverage couldn't be any more different than Palantir's. While investors continue to cheer on Palantir's dominance, it seems that only negativity surrounds UnitedHealth at the moment.

At the core of the health insurer's problems are some operational hiccups. Mismanagement in forecasting utilization rates in the company's Medicare Advantage business, as well as some unforeseen challenges in the pharmacy benefits management (PBM) segment, caused management to reduce financial guidance for 2025.

If this weren't enough to get investors worked up, UnitedHealth also replaced its CEO as the company seeks to right the ship and turn things around by next year.

UnitedHealth's downward revision and executive changes were met with a stock sell-off for the ages. Don't believe me? As of this writing, shares of UnitedHealth trade at $296 -- hovering near a five-year low.

Which stock is the better buy?

Despite its near-term headwinds, UnitedHealth stock looks awfully tempting at a forward price-to-earnings (P/E) multiple of just 13. When you consider that insiders have been buying the stock in the aftermath of this epic sell-off, I'm cautiously optimistic that all of the bad news surrounding UnitedHealth is priced in.

UNH PE Ratio (Forward) data by YCharts

On the other side of the equation, I think it's becoming increasingly difficult to argue that max upside isn't already priced into Palantir. Sure, I'm bullish on the company's future, but buying the stock near an all-time high doesn't seem like a prudent idea right now.

Overall, I'd choose to buy the dip in UnitedHealth as opposed to chasing the momentum fueling Palantir stock at the moment.

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!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 173% 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 June 2, 2025

Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

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!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 171% 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 June 2, 2025

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.

Only one S&P 500 stock has outperformed Palantir Technologies (NASDAQ: PLTR) so far this year. But it's a pretty close contest. NRG Energy's shares have soared around 76% year to date, while Palantir's gain lags by only a few percentage points.

Despite Palantir's tremendous momentum, many analysts aren't upbeat about the stock's near-term prospects. But do billionaires Ken Griffin and Izzy Englander know something about Palantir that Wall Street doesn't?

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

Buying Palantir stock hand over fist

At the end of 2024, Griffin's Citadel Advisors owned 441,755 shares of Palantir. In the first quarter of 2025, the hedge fund more than tripled its position in the artificial intelligence (AI) software provider.

Englander is arguably even more enthusiastic about Palantir. In the first quarter, his Millennium Management hedge fund more than quadrupled its stake to 1,312,758 shares.

Both successful investors also employed options strategies with the stock. Griffin's and Englander's hedge funds held both call and put options for Palantir at the end of the first quarter.

While these two billionaires are indisputably buying Palantir Technologies shares hand over fist, the stock doesn't make up a large percentage of their portfolios. That's not surprising, though, considering that Griffin's Citadel Advisors has more than 5,800 holdings, while Englander's Millennium Management has more than 3,900 holdings.

But Wall Street isn't so upbeat

Wall Street doesn't seem to share Griffin's and Englander's optimism about Palantir. The consensus 12-month price target for the stock among analysts surveyed by LSEG is roughly 22% below the current share price.

Only one of the 25 analysts polled by LSEG in June rated Palantir as a "strong buy." Another three analysts recommended buying the stock. However, seven analysts viewed Palantir as an "underperform" or advised investors to sell. Fifteen analysts recommended holding the stock.

Why isn't Wall Street as enthusiastic about Palantir as the two billionaire hedge fund managers seem to be? Probably the biggest objection for analysts is valuation. Palantir's shares trade at nearly 244 times forward earnings. I'd say that was a nosebleed forward multiple, but that might not be a strong enough description.

Most analysts don't seem to think Palantir's growth prospects justify this sky-high valuation, either. The software company's price-to-earnings-to-growth (PEG) ratio based on analysts' five-year earnings growth projections is 4.22. PEG ratios generally need to be below 1.0 for a stock to be considered attractively valued.

Who's right?

Maybe Griffin and Englander do know something about Palantir that most analysts on Wall Street don't. Perhaps the billionaire investors expect much stronger growth from the company than analysts forecast. Maybe they agree with Wedbush's Dan Ives, who predicts that Palantir's market cap will more than triple to $1 trillion over the next two to three years.

I suspect, though, that the more bearish opinion held by Jefferies analyst Brent Thill is a better take. Thill noted on CNBC's Closing Bell Overtime show a few weeks ago that no tech stock has ever been able to sustain a super-high multiple like Palantir's.

Like Thill, I don't question the strength of Palantir's underlying business. The company makes great software. It should have strong growth prospects. Palantir might even enjoy a bonanza if President Donald Trump's Golden Dome missile defense system is funded by Congress and the company wins a lucrative contract to help build it. But this growth still doesn't seem to be enough to justify Palantir's valuation, in my view.

I also wonder whether Griffin and Englander are really as bullish about Palantir as their recent buying indicates. We don't know the detailed information about the option trades they've made. It's possible that those options significantly hedge their positions in Palantir. After all, hedging is what hedge funds do. Maybe, just maybe, Griffin and Englander are more closely aligned with the consensus Wall Street view of Palantir than meets the eye.

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!*

Now, it’s worth noting Stock Advisor’s total average return is 792% — a market-crushing outperformance compared to 171% 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 June 2, 2025

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.