Prediction: 2 Artificial Intelligence (AI) Stocks That Will Be Worth More Than Palantir by 2026

The S&P 500 has been on an incredible bull run over the last 28 months, and one of its biggest driving force has been the artificial intelligence (AI) industry. Recent advances have led to a lot of investor excitement about the potential for the technology to change nearly every business in the economy.

Few companies have benefited as much from the increases in AI spending and investor excitement as Palantir Technologies (NASDAQ: PLTR). The company helps government agencies and business enterprises make sense out of the mountains of data they generate and collect. When data science tools are more accessible to more decision-makers, they can make better decisions. The premise is that paying for Palantir's software can pay for itself quickly.

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While Palantir has long served U.S. government agencies and the military, the release of its Artificial Intelligence Platform (AIP) accelerated its growth, particularly among commercial customers. Its revenues have increased 50% over the last two years. But Palantir's stock price has climbed a whopping more than tenfold in that same period, giving it a $204 billion market cap and a sky-high valuation. And that's after a more than 30% drop from the peak it hit earlier this month.

Given that high expectations for the business are now baked into the stock price, Palantir could continue to drop with even the slightest hiccup in its financial results. Meanwhile, two other AI stocks look poised to overtake the AI darling in value by 2026. Here's what investors need to know.

1. Qualcomm

Qualcomm (NASDAQ: QCOM) isn't the semiconductor stock that comes to most people's minds first when they think of artificial intelligence. It doesn't make GPUs or network switches like some of the most hyped chipmakers. However, it could play a crucial role in supporting the artificial intelligence trend in the coming years.

Qualcomm operates two business segments. Its high-margin licensing segment, QTL, holds a raft of important patents for wireless communication, including 3G, 4G, and 5G. It charges device makers a percentage of the price of each device sold that uses its patented technologies.

Qualcomm currently faces a significant headwind as Apple is shifting away from using tech built on Qualcomm's patents. Instead, the iPhone maker is developing its own baseband chips, The recently released iPhone 16e was the first device it brought to market that uses its in-house chips.

Still, the bulk of Qualcomm's revenue and profits come from its chip business, QCT. And that business could see a big bump in the near future as tech companies embed more AI processing power and capabilities into PCs, smartphones, and other personal computing devices.

Qualcomm makes the leading smartphone chip for high-end Android devices -- the Snapdragon mobile system-on-chip line. It has adapted that platform for PCs and automotive applications as well. With consumers seeking ever more capable devices and more smart features in their vehicles, Qualcomm has seen strong sales growth. The QCT segment's revenues climbed 20% in Qualcomm's last fiscal quarter, and its earnings before taxes increased 25%.

As developers create new AI software designed to run on devices like smartphones, those devices will need more powerful processors. Apple has shown that advanced on-device AI requires more powerful computing capabilities, which is why it has limited its Apple Intelligence features to its newer PCs and most recent iPhones. As other device makers and software developers keep pace, the demand for high-powered Snapdragon processors could increase even faster.

Qualcomm stock trades for just 14.3-times expected forward earnings as of this writing. That makes it an absolute bargain of a stock, especially given that the company could benefit so much from growing demand for AI on devices. The stock has traded at an average trailing P/E ratio of about 18 since 2021, which implies about 25% upside from the current share price. A rise of that magnitude would push its market cap to about $230 billion, exceeding Palantir's current value.

2. Adobe

Adobe (NASDAQ: ADBE) has invested a lot in artificial intelligence over the last few years, but investors are still wary about the impact that recent advancements in generative AI could have on its business. Many see new AI-powered creative tools as threatening to make Adobe's Creative Cloud applications unnecessary.

But Adobe's competitive advantages remain strong. Its tools are the industry standards, so it's unlikely professional creatives will shift away from them anytime soon. Businesses expect deliverables in Adobe's file formats, and they expect designers and other creatives to be proficient (at least) with its software. Few professionals will want to take on the switching costs involved in leaving Adobe.

What's more, the creative capabilities unlocked by generative AI could ultimately benefit Adobe, as it makes it easier for more people to make designs, images, or videos. That's why Adobe has leaned into its Firefly AI model, giving users access to it through its entry-level Adobe Express software. Management says it has seen strong user acquisition from Express, which could lead to greater adoption of its premium software later. Meanwhile, it implemented price increases, charging a premium for more Firefly access. All of that led to an 11% increase in annual recurring revenue for Adobe's digital media segment in 2024.

Perhaps the bigger opportunity for Adobe with AI comes in its marketing solutions business. While its Creative Cloud business often goes hand in hand with its marketing software (for creating ad campaigns), AI could help supercharge ad campaigns by helping businesses gather more data, make sense of it, and optimize their ad spending. Adobe launched GenStudio for Performance Marketing to pursue that massive opportunity, and integrated Firefly Services into the broader GenStudio product in the fourth quarter. Management says the early responses have been very promising.

Adobe stock trades for less than 22-times analysts' expectations for 2025 earnings. That's well below its historic average, suggesting significant upside potential for shares that have largely moved sideways over the last few years. A 25% increase in the share price would push its trailing P/E into the high 20s, which is closer to its historic average, but still presents a cautious outlook for the future growth of the company. Such growth would push Adobe's valuation above $240 billion, exceeding Palantir's current value.

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Adam Levy has positions in Adobe, Apple, and Qualcomm. The Motley Fool has positions in and recommends Adobe, Apple, Palantir Technologies, and Qualcomm. The Motley Fool has a disclosure policy.