What's the Better Artificial Intelligence (AI) Stock: Palantir Technologies or Tesla?

The stocks best positioned to benefit from artificial intelligence (AI) are likely to deliver the best gains for long-term growth investors. AI can not only open new growth opportunities but also increase efficiency and improve a company's profitability by automating tasks and leveraging agents.

Palantir Technologies (NASDAQ: PLTR) and Tesla (NASDAQ: TSLA) are two stocks that investors are bullish on these days, due to their long-term opportunities in AI. Tesla has a market cap of around $1.5 trillion, while Palantir's valuation is lighter at around $320 billion -- but it has been rising fast.

The growth opportunities are very different for these businesses, and what complicates things is that investors are already pricing in a lot of future growth; these are both extremely expensive stocks to own right now. It begs the question: which AI stock is the better buy today?

Image source: Getty Images.

Palantir's already been delivering fantastic growth, while Tesla is in the midst of a transition

On Monday, Palantir posted its first-quarter results for 2026, which were astounding -- revenue was up 85% year over year, coming in at $1.6 billion. The business, known for its counterterrorism and surveillance software, achieved impressive results across both its commercial and government segments. Its Rule of 40 score topped 145%, and the company also raised its guidance. AI has already transformed the company, making it one of the hottest tech stocks to own in recent years.

Tesla, on the other hand, is still selling investors on a growth story featuring robotaxis and humanoid robots. And it could still be multiple years before either opportunity results in significant revenue for the business. Today, its operations center heavily around its electric vehicles. For the first quarter of 2026, the company generated $22.4 billion in revenue, an increase of 16%. While it's a much more modest rate of growth than Palantir, Tesla's top line is also significantly larger.

Both stocks trade at incredibly high earnings multiples

These stocks attract a lot of attention from retail investors due to their enticing growth stories, and their respective CEOs aren't shy about boasting about the long-term growth opportunities for their businesses. That excitement has inflated their prices, sending them to enormous valuations.

TSLA PE Ratio data by YCharts

With Tesla's earnings deteriorating recently due to heightened competition and Palantir's stock falling sharply this year, the stocks have reversed positions in terms of valuation, with Tesla's stock now more expensive than Palantir's. However, whether a stock trades at 350 times earnings or merely 150 times earnings, it's still incredibly expensive. One good or bad earnings report can quickly impact the multiple.

Which stock are you better off buying today?

There's inevitably going to be significant downside risk, regardless of which of these stocks you buy. With both Tesla and Palantir, expectations are sky high, and that's evident with Palantir's stock falling in recent days, even after the company posted some terrific results. For investors to be willing to place an even higher value on either of these stocks, it won't be easy. They are both down double digits this year, as investors appear to be having second thoughts about their valuations.

If you're choosing between these two stocks, however, in terms of which one is the better AI investment, then I think Palantir is the better overall buy. It is already generating some strong growth due to AI, while for Tesla, it's the hope and expectation that drives the stock. And with CEO Elon Musk having a track record of sometimes overpromising and underdelivering, I'd take a wait-and-see approach with Tesla to see whether his vision is truly coming to fruition, rather than just believing it will.

Palantir is still a risky stock to own given its valuation, but with a strong relationship with the U.S. government and an AI platform generating significant revenue, it looks to be the better option for AI investors today.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Tesla. The Motley Fool has a disclosure policy.