Comparing Investment Opportunities in AI Stocks
Alphabet, Google’s parent company, appears significantly undervalued compared to Palantir. While Palantir’s forward price-to-earnings ratio stands at an eye-watering 256.4, Alphabet’s is just 18.7.
Despite Palantir showing faster growth in revenue and earnings, Alphabet’s profits rose by 46% year-on-year in the first quarter. The substantial growth expected for Palantir is already reflected in its stock price, but not so much for Alphabet, whose price/earnings-to-growth (PEG) ratio is a reasonable 1.33.
Alphabet is poised to gain from the increasing uptake of AI technology. Its Google Cloud division is the fastest-growing among major cloud service providers, and the introduction of generative AI into Google Search is enhancing user experience. Furthermore, Waymo leads the field in AI-driven autonomous ride-hailing.
Investors should note the regulatory challenges Alphabet faces, including two antitrust losses in the past year. However, Alphabet is appealing these decisions, making it a more attractive investment compared to betting against it.
Evaluating Meta Platforms’ AI Potential
Meta Platforms also offers better valuation than Palantir, with shares trading at 29 times forward earnings. This may seem high, yet it pales in comparison to Palantir’s valuation.
While Palantir competes for contracts, Meta enjoys a built-in audience of approximately 3.43 billion daily users across its platforms—Facebook, Instagram, Messenger, and WhatsApp—making it easier to attract advertisers.
Nvidia’s Growing Investor Appeal
Nvidia, once out of favor, has regained traction among investors. Over the past three months, its growth isn’t far behind Palantir’s, but it boasts better prospects for continued growth.
In its first quarter of 2025, Nvidia reported a 69% increase in revenue year-over-year, outperforming Palantir’s 39% growth. Even though Nvidia’s stock isn’t exactly cheap, it remains more reasonably priced compared to Palantir considering their respective growth potentials.
