Best Artificial Intelligence (AI) Stock to Buy Now: Nvidia vs. Palantir
Key Points
Palantir's software platform is a better long-term business model.
Nvidia is capitalizing on massive AI spending.
- 10 stocks we like better than Palantir Technologies ›
Nvidia (NASDAQ: NVDA) and Palantir (NASDAQ: PLTR) have been top artificial intelligence (AI) investment options over the past few years. These two have partnered together to optimize their offerings and represent two different investment approaches: hardware (Nvidia) and software (Palantir).
There are merits to investing in both, but which one is the better buy now?
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
Image source: Getty Images.
Software is a more sustainable business model
Palantir sells AI-powered data analytics software. This software has been deployed in several applications, including national defense, intelligence, as well as commercial applications. Essentially, a client that has massive data inflows can deploy Palantir's software and receive real-time actionable insights on what the next best step is. It also has a platform to automate some of this decision-making, boosting a client's overall effectiveness.
Nvidia makes graphics processing units (GPUs). GPUs aren't just intended for processing gaming graphics (although that was their original use case, thus the name). GPUs can process multiple calculations in parallel, making them the perfect choice for any computing need that requires a lot of processing power. AI perfectly suits this description, and Nvidia's products have been widely deployed in this sector.
But which business is better to be in?
Palantir works on a subscription model, which means its clients must pay a monthly or annual subscription fee to continue using their platform. If Palantir's software stays relevant, this can create an endless revenue stream that isn't subject to the ups and downs of the general economy.
Nvidia isn't in as nice a situation. It's currently thriving thanks to huge AI spending, something that won't last forever. Once AI computing capacity has been built out, demand for its products will fall. Still, GPUs burn out after a few years of usage, so Nvidia will still have a huge business replacing these products once they burn out. But it isn't as consistent and predictable as Palantir's software business.
All things being equal, Palantir's software business is a far better one to invest in than Nvidia's hardware business.
Winner: Palantir
Their growth is about the same
Taking a look at their latest results, Palantir's revenue grew an impressive 70% year over year, while Nvidia's increased by 73%.
NVDA Revenue (Quarterly YoY Growth) data by YCharts
While I could say that Nvidia is growing faster and give it a point here, I think that's a bit ridiculous. It's hard to nitpick either company's growth rates, and investors should sit back and be impressed with the stellar growth each company has delivered.
Winner: Tie
Nvidia's stock is far cheaper
Palantir's software business model has earned the stock a huge premium in the market, but the question is whether it's worth it. Palantir's stock trades for an incredible 114 times forward earnings, while Nvidia's trades for a far more reasonable 22.4 times.
NVDA PE Ratio (Forward) data by YCharts
Is Palantir's software business worth 5 times more than Nvidia's hardware business? I'd say no. I'd be fine if Palantir traded in the 40 to 50 times forward earnings range, but 114 times forward earnings is just too much. There are several years' worth of strong growth already baked into the stock price, and if it falls short of those expectations, the stock could come crashing down.
Nvidia has relatively few expectations baked into its stock beyond this year. If the AI build-out continues through 2030 like many project, Nvidia's stock still has plenty of room to skyrocket.
Winner: Nvidia
Which is the better stock pick?
With the final score being one to one, with one point given as a tie, it may look like these two are dead even. However, I think investors need to understand just how much growth is already priced in to Palantir's stock. I think this is a prohibitive investing factor, and makes Nvidia the overall better buy. If Palantir's price tag were more reasonable, this decision would be far harder. But for the next few years, I think Nvidia is hands-down the better pick between the two.
Should you buy stock in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $514,000!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,105,029!*
Now, it’s worth noting Stock Advisor’s total average return is 930% — a market-crushing outperformance compared to 187% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of March 15, 2026.
Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
Recommended Articles
