Palantir Technologies vs. Advanced Micro Devices: A 300% vs. 110% Implied Upside Showdown

In the fast-paced world of tech stocks, Palantir Technologies (PLTR) and Advanced Micro Devices (AMD) have been turning heads, with analysts forecasting impressive future growth for both companies. While each company operates in different niches of the tech world, both stand to benefit significantly from the AI revolution and are attracting investors’ attention. Let’s take a deeper dive into their growth prospects and why they’re considered prime candidates for future success, with some cautionary notes for investors.

Palantir Technologies: 300% Implied Upside

Palantir Technologies is a leader in data analytics and AI platforms, helping commercial and government clients streamline complex data, develop machine learning models, and derive actionable insights. The company’s recent performance has been exceptional, reporting a 36% year-over-year revenue growth to $828 million in Q4, marking its sixth consecutive quarter of accelerating revenue.

The company has recently been recognized by major industry analysts, with International Data Corporation naming it a leader in decision intelligence software, and Forrester Research ranking it among the top companies in AI platforms. Its customer base increased by 43% to 711, and the average existing customer increased spending by 20%. These growth metrics have positioned Palantir as a formidable player in the AI arms race, and analysts believe the company could reach $1 trillion in value.

However, despite Palantir’s impressive track record, its current valuation is a concern. Trading at 270 times adjusted earnings, the stock appears expensive, even with analysts expecting a 37% increase in earnings over the next four quarters. In fact, even if Palantir’s earnings double the expected growth rate, it would still seem overpriced. While there is a belief that the company will be worth more in the long run, investors may want to wait for better buying opportunities to avoid overpaying for this growth stock.

Advanced Micro Devices: 110% Implied Upside

On the other hand, Advanced Micro Devices (AMD) is a semiconductor company known for its Ryzen and Epyc CPUs and Instinct GPUs, which are widely used in data centers, personal computers, and gaming systems. Over the years, AMD has managed to capture significant market share from Intel, especially in the CPU market, as Intel has struggled with missteps. While AMD is competing fiercely with Nvidia in the data center GPU space, it has yet to topple Nvidia’s dominance, largely due to Nvidia’s superior MLPerf benchmark results and more robust software tools for AI development.

In its most recent quarter, AMD posted impressive results with a 24% revenue increase to $7.7 billion and a 42% rise in non-GAAP earnings to $1.09 per share. Despite missing expectations in its data center sales, AMD expects to see a surge in data center AI product revenue in the coming years, with CEO Lisa Su predicting that the segment could grow from over $5 billion in 2024 to tens of billions annually. Wall Street anticipates a 41% growth in adjusted earnings over the next four quarters, making AMD’s current valuation of 33 times adjusted earnings seem relatively attractive.

The current price-to-earnings-to-growth (PEG) ratio for AMD is well below 1, which typically indicates that a stock is undervalued. This is in stark contrast to Palantir, whose PEG ratio is above 7, signaling that its stock might be overpriced relative to its future growth expectations. While the outlook for AMD’s data center products remains promising, there is some concern that Wall Street might be overestimating the company’s future earnings growth, especially given the projected modest increases in CPU sales and personal computer shipments.

Palantir vs. AMD: Which is the Better Buy?

Both Palantir Technologies and Advanced Micro Devices are well-positioned in their respective industries, with exposure to the booming AI and data analytics sectors. Palantir is a leader in AI platforms and has made impressive strides in its customer growth and financial performance. However, its high valuation raises concerns, especially in the near term. AMD, on the other hand, is showing solid fundamentals with an attractive valuation, although its competition with Nvidia in the GPU market and its exposure to slower-growing segments such as personal computers could pose risks.

Ultimately, investors may want to consider the trade-offs between Palantir’s high growth potential and the risk of overpaying, and AMD’s more attractive price with potential growth in its data center AI segment but also some challenges in the broader semiconductor space. Both companies could be great long-term investments, but it may be wise for investors to tread carefully and take a cautious approach to their positions in these stocks.