Nvidia vs. Palantir: Wall Street Analysts Say to Buy One, but Think the Other Is Overvalued

Key Points

• Nvidia is the largest company in the world by market cap.

• Palantir's stock has been on a phenomenal run in recent years.

• Wall Street analysts see massive potential in both companies.

• 10 stocks we like better than Nvidia ›

Few stocks have benefited more from the artificial intelligence (AI) revolution or generated better gains for shareholders than Nvidia (NASDAQ: NVDA) and Palantir (NASDAQ: PLTR). Nvidia is now the largest company in the world by market cap and is viewed as the ultimate pick-and-shovel play for the AI revolution. Meanwhile, many investors have come to believe that AI decision-making company Palantir has unlimited potential, and for most of the year, its stock has been on a tear.

While the market undoubtedly loves both of these stocks, Wall Street analysts covering one are pretty much unanimous in saying it's a buy, while those covering the other largely think it's overvalued.

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Image source: Getty Images.

Nvidia: The world's biggest company could get bigger

Surging sales and profits, combined with the hype around AI, have catapulted Nvidia to a roughly $4.27 trillion market cap (as of Sept. 2). With such a high valuation, some wonder how much higher Nvidia can keep going because at the end of the day, the law of large numbers suggests that beyond a certain point, growth rates invariably begin to plateau. Perhaps that's why the company's strong fiscal 2026 second-quarter earnings failed to give a lift to the stock.

But if you ask professional Wall Street analysts, Nvidia is indeed likely to keep moving higher over the next year. Of the 38 analysts who have issued research reports on Nvidia over the past three months, 34 rate the stock a buy, three call it a hold, and only one says sell, according to TipRanks. Their average one-year price target points to another 20% upside for the stock.

Nvidia currently trades at around 39 times forward earnings. That's certainly not cheap, especially for a company of its size, but by no means the most ridiculous multiple we've seen in the world of AI, especially when you consider that the chipmaker is still growing extremely fast. In fiscal Q2, Nvidia reported 61% growth in diluted earnings per share and 56% growth in revenue. Meanwhile, management is guiding for revenue to grow from the $46.74 billion it reported in the second quarter to about $54 billion in the third.

Keep in mind that for much of this year, the company has not been able to sell the H20 chips it designed specifically for the Chinese market. Those less powerful chips were previously acceptable to export to China even under the trade restrictions set by the U.S. government, but earlier in 2025, President Donald Trump blocked their export too. However, in August, Trump agreed to allow Nvidia to sell the chips to China again -- but the U.S. government gets 15% of the revenues from those sales.

Nvidia management has said the company could sell about $2 billion to $5 billion worth of chips to Chinese businesses in the current quarter if geopolitical tensions ease. Furthermore, CEO Jensen Huang estimates that business in China would have been a $50 billion opportunity in 2025, had it not been for geopolitical tensions. Huang also thinks the opportunity in China will grow by 50% next year.

"I'm feeling more bullish," Wedbush analyst Dan Ives recently told TheStreet. "Because when you factor even in the China numbers, this is really just the start of an acceleration for Nvidia across the board."

Palantir: Even great companies can have overvalued stocks

Palantir has been a darling of the market in recent years. The company leverages AI to help government agencies and companies gather, manipulate, and analyze data in ways that have never been possible before. The platform can also recommend certain actions based on the data and discuss some of the potential repercussions of taking such actions. Palantir's stock has more than doubled this year and is up by more than 1,600% in the past five years.

It's likely for this reason that some Wall Street analysts think the stock has run too far, too fast. Of the 20 Wall Street analysts who have issued research reports on Palantir over the past three months, five have buy ratings on the stock, 13 call it a hold, and two say sell, according to TipRanks. Their average one-year price target for Palantir implies that the stock is fairly valued at its current level.

Palantir has certainly demonstrated strong growth. In the second quarter, revenue grew 48% year over year, while diluted earnings per share more than doubled. However, trading around 242 times forward earnings, the company's valuation premium is simply stunning.

Citron Research's Andrew Left, a famous short-seller, said he is a fan of the company and its CEO, Alex Karp, but that the valuation has clearly gotten out of hand.

"It's a wonderful company, but if this was the greatest company that was ever created and we gave it the same multiples, let's say Nvidia in 2023, the stock still can get cut by two-thirds, and that would be like 35 times sales," he said in an interview on Fox Business last month.

Some investors still may want to add the stock to their portfolios to increase their exposure to the AI space. If you're one of them, I would recommend either using a dollar-cost averaging approach, which would smooth out your cost basis over time, or waiting for a better entry point to buy.

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Bram Berkowitz 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.