Nvidia and Palantir work in different areas, but both tech firms are profiting from their secular expansion of the AI market.
Nvidia’s GPUs are often connected with video games, but a growing amount of data centers are installing its top-end GPUs to deal with AI tasks. Palantir’s data mining systems accumulate and work on data from many different sources to aid government agencies and private companies to make AI-driven choices.
Both companies have given impressive gains over the previous 12 months. Nvidia’s stock has more than doubled as it kept selling more data center and gaming GPUs. Palantir’s stock increased around 160% as it surprised investors with its good revenue growth and great long-term targets. But should investors who missed those gains consider purchasing either stock?
Nvidia’s growth vs Palantir
Nvidia’s revenue increased by 53% to $16.7 billion during fiscal 2021, which ended this Jan., while its adjusted net income went up 75% to $6.3 billion. Its adjusted gross margin increased 310 basis points to reach 65.6%.
In the first part of fiscal 2022, Nvidia’s revenue went up another 75% y/y to $12.2 billion as its adjusted net income went up 99% to $4.9 billion. Its current adjusted gross margin went up 50 basis points to reach 66.4%. Its growth was mostly driven by its data center and gaming GPUs, which gave the company 83% of its revenue during the last quarter.
Nvidia now trades at 55 times its forward earnings and 25 times its sales this year. Those valuations may seem high, but they are fairly reasonable compared to Wall Street’s good expectations for the firm.
Palantir now trades at 34 times the sales this year. That valuation also seems to be high, but it might be justified if Palantir reaches its target of bringing in over 30% revenue growth for the next four years.
But numerous headwinds — including enterprise market competition, the loss of possible government contracts, and the public’s watchful eye of its secretive deals with federal agencies — could still restrict its long-term gains.
The best: Nvidia
Palantir could be a more direct move in the AI market than Nvidia is, but it is also more risky. Nvidia is more diversified, and more profitable, and faces less controversies, and its stock is much cheaper.
Author: Steven Sinclaire