Palantir Stock: With a Fresh Earnings Report Showing Even Faster Growth, Is It Now a Better AI Stock to Buy Than Nvidia?

After Monday's market close, Palantir Technologies (NASDAQ: PLTR) reported a remarkable first quarter. Revenue rose 85% year over year -- the artificial intelligence (AI) data analytics specialist's fastest growth rate as a public company -- and management raised its full-year revenue guidance from 61% growth to 71%. With numbers like these, some investors may be wondering if the AI-focused software company now deserves the AI throne -- in terms of investor attention -- currently held by AI chipmaker Nvidia (NASDAQ: NVDA).

But there's a catch: A great business doesn't always translate to a great stock. And while Palantir's results may be extraordinary, the stock's valuation could already price in years of equally extraordinary execution.

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Growth keeps speeding up

The growth story at Palantir remains truly exceptional. In fact, it's getting better.

The company's year-over-year revenue growth rate climbed sequentially in every quarter of 2025, going from 39% to 48% to 63% to 70%. With the first quarter of 2026 now in the books, that streak is up to 11 consecutive quarters of accelerating growth -- and 85% is the highest reading yet.

Even more striking is what's happening specifically in Palantir's U.S. business.

U.S. revenue rose 104% year over year to $1.28 billion -- the first time that figure has cleared 100% growth since Palantir went public. The U.S. commercial segment surged 133% to $595 million, and U.S. government revenue rose 84% to $687 million, accelerating from 66% growth in the fourth quarter. The company ended the quarter with 615 U.S. commercial customers -- up 42% from a year ago.

Profitability inflected too. Palantir's first-quarter net income roughly quadrupled to $871 million, lifting first-quarter earnings per share to $0.34 -- up from just $0.08 a year earlier. Adjusted operating income hit $984 million, equating to a 60% margin.

"Our financial results now demonstrate a level of strength that dwarfs the performance of essentially every software company in history at this scale," said Palantir CEO Alex Karp in the company's first-quarter shareholder letter.

Management's updated outlook backs that up. Palantir now expects 2026 revenue of roughly $7.66 billion at the midpoint, implying about 71% year-over-year growth -- a meaningful step up from the 61% guidance issued in February.

Going further, Karp also told CNBC he expects Palantir's combined U.S. business, both government and commercial, to double again in 2027.

The valuation problem doesn't go away

But all of this success may already be reflected in the stock -- and then some. With shares trading near $144 as of this writing, the AI software specialist commands a market capitalization of about $350 billion. Stack that against trailing-12-month revenue of roughly $5.2 billion and trailing-12-month net income of about $2.3 billion, and the stock trades at a price-to-sales ratio close to 67 and a price-to-earnings ratio near 150.

Now consider Nvidia. The chipmaker's most recent fiscal quarter (the period ended Jan. 25, 2026) saw revenue jump 73% year over year to $68.1 billion, with data center revenue climbing 75% to $62.3 billion. And guidance for the fiscal first quarter of 2027 calls for $78 billion in revenue, implying roughly 77% year-over-year growth. And the company finished its fiscal year with $120 billion in net income on $216 billion in revenue.

Despite a comparable growth trajectory, Nvidia trades at a price-to-earnings ratio of about 41 and a price-to-sales ratio close to 23. Its market cap of around $4.8 trillion is a far bigger number in absolute terms, of course, but the valuation multiples on its underlying earnings and sales are dramatically lower.

Of course, Palantir's narrower focus on high-growth AI software may deliver faster long-term growth with less cyclicality. But this optimistic view may already be priced in.

Ultimately, I think that for investors choosing between the two AI giants today, Nvidia looks like the better way to play the AI build-out. Palantir's business may continue to fire on all cylinders -- but its valuation simply remains extremely difficult to justify.

Daniel Sparks and his clients have 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.