Palantir vs CoreWeave: Which is the Better Buy, According to Wall Street?

Palantir Technologies (NASDAQ: PLTR) and CoreWeave (NASDAQ: CRWV) have been among the most-watched stocks on the planet over the past year. They both have soared into the artificial intelligence (AI) space, proving their ability to play a key role here -- and that has won over both customers and investors.

Palantir's earnings have roared higher, and CoreWeave has seen revenue climb in the triple digits. And both companies have spoken of unstoppable demand. Palantir's stock has advanced more than 500% over the past five years, and CoreWeave's has climbed more than 80% since its initial public offering about a year ago.

But both companies have faced some headwinds along the way. Investors have worried about Palantir's high valuation and about CoreWeave's reliance on debt to grow its business. Still, Wall Street expects both stocks to advance over the coming 12 months -- but which is the better buy? Let's find out.

Image source: Getty Images.

The case for Palantir

Palantir has been around for more than 20 years, but the company truly saw earnings take off in recent years. This is thanks to its role in the AI revolution. Palantir sells software that helps customers gather and analyze their data -- then use it to solve problems or improve their operations.

One particular Palantir platform, which integrates the power of large language models, has been highly popular in recent quarters. This is the Artificial Intelligence Platform (AIP), and it's helped the company's commercial business take off. In its earlier days, Palantir relied on government contracts for growth; today, government and commercial businesses are both major contributors to revenue. And Palantir also has demonstrated its strength in balancing revenue growth with profitability.

As mentioned above, the one thing that's held some investors back is Palantir's sky-high valuation. Though after recent declines it's much lower than it was months ago, it remains hefty.

PLTR PE Ratio (Forward) data by YCharts

The case for CoreWeave

CoreWeave offers AI customers access to something in high demand these days: capacity for AI workloads. The company has invested in a fleet of Nvidia graphics processing units (GPUs), the AI chips that drive major tasks such as training and inference, and offers them for rent. Customers can rent by the hour, offering them great flexibility -- they can go to CoreWeave for quick or long-term projects.

All of this has driven explosive growth quarter after quarter, and CoreWeave recently said that it's been the fastest cloud to reach $5 billion in annual revenue. The company now must invest to keep up with demand, including the $66 billion in contracted backlog.

And this is where we get to the point that's weighed on the minds of some investors. CoreWeave, which already is highly leveraged, plans to increase spending. In fact, it will double capex from last year's level to $30 billion in 2026. This is to address the backlog, so the investment is leading to revenue growth, but investors still worry about the path to profitability as the company's losses have widened.

Which stock should you choose?

Wall Street has more buy recommendations than sell recommendations for both stocks and expects them to climb in the months ahead. The average price forecast calls for a 27% increase for Palantir and a 67% gain for CoreWeave. So, according to Wall Street, CoreWeave may be the better buy right now.

That said, before making any moves, it's important to consider your investment strategy and feelings about risk. If you're a cautious investor, for example, these stocks probably aren't the best investments for you right now -- due to the negative points I've mentioned above. If you don't mind some risk, you might opt for Palantir -- in spite of the high valuation, the company is profitable and has demonstrated growth over time.

But if you're an aggressive investor who can accept the risk of investing in a highly leveraged company, you might follow Wall Street and bet on CoreWeave. Demand for compute could supercharge the stock in the months to come.

Adria Cimino has 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.