The Odd One Out: Why One Mega-Cap Tech Giant Is a Sell While Two Others Are Buys

Mega-cap stocks are those with a market cap of $200 billion or more. Despite all the focus on these stocks, they account for only 76 of the tickers trading on U.S. exchanges today.

Like stocks of all sizes, this subset of large-cap stocks is made up of buys, sells, and holds. Within this tier of stocks, investors should consider selling one and purchasing two others, and here's why.

Image source: Getty Images.

Stock to sell: Palantir

At first glance, Palantir (NASDAQ: PLTR) looks like the last stock investors should sell. It has leveraged its AI technology to deliver eye-popping productivity gains for its commercial customers.

Plus, as the world seems more dangerous, there could easily be a renewed focus on its defense-oriented applications. Thus, it's not surprising that Palantir nearly doubled its revenue, growing by 93% yearly in the second quarter of 2026, with its U.S. revenue increasing by 115%.

Unfortunately, this has become a known quantity, and its market cap exceeds $460 billion. Still, it has only reached "mega-cap" status because of its valuation.

Currently, its P/E ratio is 164, and its forward earnings multiple of 119 shows that a one-time expense has not skewed that multiple. Moreover, a price-to-sales (P/S) ratio of 80 figures years of massive revenue growth into its stock price.

That also prices it for perfection, meaning the slightest hint of bad news could send its stock tumbling. Considering that investors can find massive growth in stocks without such elevated valuations, your capital is probably best deployed elsewhere.

Stock to buy: Nvidia

One example of that rapid growth at a discount is Nvidia (NASDAQ: NVDA). Nvidia stock began to take off in 2022 when investors realized its AI accelerators powered OpenAI's ChatGPT, and it has drifted upward since that time. Since it bottomed four years ago, the stock has risen by over 1,900%!

Admittedly, at a market cap of almost $5.7 trillion, another such gain is unlikely. Nonetheless, despite its size, its rapid growth has been massive, and that is on track to continue.

In the second quarter of fiscal 2027 (ended July 26), Nvidia returned to triple-digit annual revenue growth, with revenue of $96 billion rising 106%. Amid its growth, costs and expenses have risen at a similar pace, though income from investments meant its $60 billion in net income increased by 126% over the same time frame.

Still, perhaps because of its massive size or the uncertainty over its future revenue growth, its P/E ratio is just 30, and its 25 forward earnings multiple suggests its growth will continue. Considering the valuation and revenue growth, Nvidia is arguably the safest, fast-growing stock in today's market.

Stock to buy: Alphabet

Among other mega-cap buys, you might want to defer to Warren Buffett's wisdom and buy Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), which Buffett initiated during his last year at Berkshire Hathaway.

Indeed, at a $4.2 trillion market cap, its days of 10-fold or more returns over short periods may be over. Still, amid the $195 billion to $205 billion it allocated to capital expenditures (capex), the company's AI-driven growth has accelerated.

The $120 billion in revenue it generated in Q2 rose 24% year over year. That exceeds the 14% annual growth rate in the year-ago quarter. That also included an 82% yearly increase in Google Cloud's revenue.

Amid much slower cost and expense growth, massive unrealized investment gains helped drive Q2 net income to $112 billion, well above levels in the year-ago quarter. Still, the 30% rise in operating income showed that much of the gain did not come from one-time events.

Admittedly, that investment gain skewed its P/E ratio to 17, though its forward P/E ratio of 29 shows that Alphabet is not an expensive stock. As AI drives company growth, Berkshire and its other investors should continue to profit from owning this stock.

Will Healy has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet, Berkshire Hathaway, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.