While Palantir is enjoying huge success, another artificial intelligence (AI) company is expanding its influence over the industry.
Palantir Technologies (PLTR 1.49%) stock experienced an amazing run over the past year. Its share price skyrocketed more than 350% in the last 12 months through the week ending Oct. 31.
So it’s noteworthy when Palantir’s billionaire shareholders decide to swap the stock for an alternative. The replacement has garnered high praise. CFRA Research’s senior equity analyst, Angelo Zino, commented that it’s “the most important company to civilization over, we think, the next five to 10 years.”
That company is Nvidia (NVDA 1.75%). Here’s a look into why Nvidia warrants consideration over Palantir as the stock to own for the long haul.
Image source: Getty Images.
A key factor behind swapping out Palantir stock
Among the billionaires swapping Palantir stock for Nvidia is Jim Simons’ hedge fund Renaissance Technologies. At the end of the first quarter, the fund had more than 16 million shares of Palantir, making it the top holding, while Nvidia was nowhere near the top, representing just 0.2% of assets under management (AUM).
But by Q2, the fund had dropped to 13.5 million Palantir shares, while Nvidia jumped to the No. 2 holding at 1.6% of AUM, a swing from just 1 million shares to more than 7 million.
One key reason for selling Palantir stock is its sky-high valuation. Here’s how its price-to-earnings (P/E) ratio, which reflects how much investors are willing to pay for each dollar of a company’s earnings based on the trailing 12 months, compares to Nvidia’s.
Data by YCharts.
As the chart shows, Palantir’s P/E multiple has soared from where it was a year ago, and is now more than 10x higher than Nvidia’s. This suggests Palantir stock is overpriced, making it a good time to sell shares.
Palantir Technologies
Today’s Change
(-1.49%) $-2.84
Current Price
$187.90
Key Data Points
Market Cap
$446B
Day’s Range
$181.21 – $190.32
52wk Range
$53.55 – $207.52
Volume
116K
Avg Vol
62M
Gross Margin
80.81%
Dividend Yield
N/A
Why the switch to Nvidia stock makes sense
Even so, why is now the time to invest in Nvidia when its stock hit an all-time high of $212.19 on Oct. 29, sending its market cap to a record $5 trillion? The reason harkens back to Zino’s quote. Artificial intelligence (AI) is transforming industries, and the technology is still in its early stages.
In the last few years, tech giants, such as ChatGPT creator OpenAI, were engaged in training their AI models, and getting the software to perform basic functions. Today, these companies are focused on improving AI inference, which is an AI model’s ability to analyze and draw conclusions from data.
AI inference requires tremendous computing power, and that’s what Nvidia’s graphics processing units (GPUs) excel at. As governments and businesses around the world build up their AI inference capabilities, they have turned to Nvidia.
For example, the British government plans to increase its computing capacity by a minimum of 20x by 2030. To that end, Nvidia is supplying more than 100,000 GPUs to the country.
But today’s AI inference is just the start. OpenAI has made it known it’s pursuing artificial general intelligence (AGI), a level of AI that is on par with human thought in terms of creativity and problem-solving. OpenAI calls AGI smarter than humans.
This level of AI model requires even greater computing capacity than what’s available today. That’s why OpenAI made a historic agreement with Nvidia to buy millions of GPUs.
Today’s Change
(-1.75%) $-3.48
Current Price
$195.21
Key Data Points
Market Cap
$4744B
Day’s Range
$194.65 – $202.92
52wk Range
$86.62 – $212.19
Volume
750K
Avg Vol
178M
Gross Margin
69.85%
Dividend Yield
0.00%
Why Nvidia stock is a buy
OpenAI won’t be the only organization to strive for AGI, meaning Nvidia is likely to enjoy more sales growth ahead. In fact, industry forecasts estimate the AI market will expand from $255 billion in 2025 to a jaw-dropping $1.7 trillion by 2031.
So while Nvidia shares aren’t cheap, given its P/E ratio is approaching 60, the company’s leadership in the AI semiconductor industry, with a GPU market share estimated at 94%, makes it well positioned to expand its business growth.
Nvidia is also working on quantum computing. This tech looks like it will be the future of computing, providing greater processing power with less energy consumption.
At Nvidia’s GTC event held in October, the company revealed its NVQLink technology, which connects quantum computers with GPU-powered supercomputers. This demonstrates Nvidia’s ambition to continue its leadership in the next evolution of computing.
Palantir is a solid company with more sales growth potential ahead for its AI solutions, but it doesn’t hold the same kind of AI industry importance as Nvidia. Global X research analyst Tejas Dessai summarized Nvidia’s key role by stating, “AI needs specialized chips to run on, and trillions worth of processing chips will be up for replacement through this decade.”
As the world transitions to AI infrastructure, the semiconductor giant increasingly becomes the center of gravity for AI, something that Palantir is not positioned to match. These factors make Nvidia a stock to own over Palantir for the long term.