Should You Forget Palantir and Buy These 2 Tech Stocks Instead?

As of this writing, Palantir Technologies (NASDAQ: PLTR) holds the top year-to-date performance of any stock within the Nasdaq 100. Yet, perhaps the time has come for investors to look elsewhere.

Here are two alternative technology stocks that investors may want to consider.

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Spotify Technology

First up is Spotify Technology (NYSE: SPOT).

Up 64% year to date, Spotify is one of the year's best-performing stocks. The secret to its success is a combination of classic bullish fundamentals.

Let's start with Spotify's business model. The company generates most of its revenue through its paid subscriber base. Thanks to its innovative audio platform, it managed to grow that paid subscriber base at a double-digit rate for several years. Spotify uses AI-powered features to build personalized playlists and introduce new music and artists. Consequently, that helps keep users happy and returning for more even as Spotify raised prices recently.

Second, the company has gotten its costs under control. Gross margins have risen to 31%, the highest ever for the company -- significantly above its lifetime average of 26%. Similarly, after years of struggling to turn a consistent profit, Spotify generated $1.3 billion in net income over the last 12 months. The aforementioned price hikes -- along with a few rounds of layoffs -- have been the driving force behind the expansion in margins.

SPOT Gross Profit Margin data by YCharts.

Finally, there's the secular growth trend of streaming. People all over the world love to stream. Given the obvious convenience, relatively low cost, and nearly endless content available, hundreds of millions of people now subscribe to one or more streaming services. With broadband internet and 5G access continuing to expand worldwide, there's even more room for Spotify and other streamers to increase their subscriber bases for years to come.

To sum up, Spotify is expanding its revenue base, cutting costs, and riding the secular growth of streaming to new heights. Investors would be wise to consider the stock right now.

Amazon

Then, there's Amazon (NASDAQ: AMZN).

Let's deal with this first: Amazon hasn't been the best tech stock to own over the last five years. During that time, the stock advanced by only 57%. That's less than what the S&P 500 generated (93%) over the same period.

So, why do I think now is the time to consider Amazon? In short, it's because Amazon has several catalysts that should give the stock a boost over the next five to 10 years.

First, there's Amazon Web Services (AWS). In many ways, AWS is like a company-within-a-company. The segment now generates over $100 billion per year in revenue. That means that if AWS was split off into a separate company, it would be around the 35th largest American company by revenue -- roughly equivalent to Bank of America.

Not only is AWS massive in terms of revenue, it also generates more than half of Amazon's overall profits. Moreover, those profits are likely to expand going forward as more organizations look to incorporate artificial intelligence (AI) systems into their everyday operations. Many of those AI systems will run on AWS' cloud infrastructure. Amazon already holds about 30% of the overall cloud-services market -- roughly equal to its two closest competitors (Microsoft and Alphabet) combined.

Second, Amazon's e-commerce margins may get a significant boost from another cutting-edge technology: robotics. Amazon already has nearly a million robots hard at work in its fulfillment centers, but the company could greatly expand the number of robots in the coming years. The company recently announced plans for testing humanoid robot deliveries -- a move that could drastically reduce costs and boost margins for the company's flagship e-commerce division.

In summary, two of Amazon's greatest strengths -- AWS and its massive e-commerce business -- are both riding strong secular trends. The growth of AI will benefit AWS as more organizations employ AI tools. Meanwhile, the growth of the robotics industry will help Amazon's e-commerce business reduce costs and grow its margins.

For those reasons, investors may want to consider adding Amazon shares now.

Should you invest $1,000 in Amazon right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bank of America is an advertising partner of Motley Fool Money. Jake Lerch has positions in Alphabet, Amazon, and Spotify Technology and has the following options: long July 2025 $425 puts on Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Bank of America, Microsoft, Palantir Technologies, and Spotify Technology. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.