Billionaire Israel Englander Buys 2 Artificial Intelligence (AI) Stocks Up 405% and 575% in 2 Years

Billionaire Israel Englander runs Millennium Management, one of the most profitable hedge funds in the world. Millennium returned 111% over the last three years, easily outperforming the S&P 500 (SNPINDEX:^GSPC), which returned 75% over the same period.

That impressive track record makes Englander a good source of inspiration for individual investors. And during the second quarter, Millennium bought two artificial intelligence (AI) stocks, quadrupling its stake in Palantir Technologies (NASDAQ:PLTR) and doubling its stake in Astera Labs (NASDAQ:ALAB).

In the last two years, Palantir shares have advanced 405%, and Astera shares have added 575%. Is it too late to buy? Here's what investors should know.

Image source: Getty Images.

1. Palantir Technologies

Palantir develops data analytics and artificial intelligence (AI) platforms to help customers in the public and private sectors integrate data, identify actionable insights, and automate work. Some analysts view Palantir as the gold standard in enterprise AI due to its unique software architecture, and several companies are attempting to replicate parts of its business model.

Traditional analytics platforms are largely built around dashboards that tell customers what is happening. But Palantir built its software around a decision-making framework called an ontology, which helps customers decide what should happen next and execute that action directly within the platform. In short, Palantir actually connects data to operations.

In particular, Palantir should benefit as sovereign AI accelerates because its AI platform is a model-agnostic orchestration tool, meaning customers can swap large language models without rewriting the underlying applications. It also includes governance controls that protect sensitive business data by ensuring prompts and outputs cannot be retained by AI model developers for training purposes.

Palantir reported phenomenal financial results in the second quarter. Revenue increased 93% to $1.9 billion, marking the 12th consecutive acceleration, and non-GAAP net income increased 215% to $0.41 per diluted share. The company also reported a phenomenal Rule of 40 score of 155%.

Palantir currently trades at 155 times adjusted earnings. That is a very rich valuation, even when Wall Street expects the company's earnings to increase at 56% annually through 2026. Most Wall Street analysts think the stock is undervalued -- the median target price of $210 per share implies 12% upside from the current share price of $186 -- but I think investors should wait for a better entry point.

2. Astera Labs

Astera develops connectivity infrastructure for cloud and high-performance data centers, especially those involved in artificial intelligence. The company's products, which fall into four categories, help data center operators scale up (connect multiple servers in one rack) and scale out (connect multiple server racks across the data center).

The Aries products improve data transmission between the primary processors (CPUs and GPUs) and the peripheral components (memory, storage). Its Taurus products improve data transmission between servers and network switches. Its Leo products expand access to memory. And its Scorpio products route data between GPUs and other accelerators.

Astera reported strong second-quarter financial results. Revenue increased 104% to $392 million, an acceleration from 93% growth in the previous year. And non-GAAP net income rose 82% to $0.80 per diluted share. In the third quarter, management estimates revenue growth will accelerate to 139% as Scorpio switches become the largest product line.

Going forward, Astera stands to benefit as AI workloads become increasingly data intensive. The first wave of generative AI products were built on single-pass models, meaning they completed tasks after a single inference. But newer multi-step models, the foundation of AI agents, are becoming more popular, and they generate far more data traffic. That should drive demand for Astera's connectivity solutions.

Astera trades at 145 times adjusted earnings, a rich valuation that is a little more palatable in context. Wall Street expects adjusted earnings to grow at 88% annually through 2027. In turn, most analysts think the stock is undervalued. The median target price of $430 per share implies 18% upside from the current share price of $363. I think investors can buy a small position in this stock today.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.