Year to date, Nvidia (NVDA 0.51%) stock has returned 2%, while Palantir Technologies (PLTR -2.34%) stock has advanced 72%. But forecasts from Wall Street analysts suggest that investors should buy one and sell the other.
- Among the 71 analysts who follow Nvidia, the median target price is $175 per share. That implies about 30% upside from its current share price of $135.
- Among the 28 analysts who follow Palantir, the median target price is $100 per share. That implies about 23% downside from its current share price of $130.
However, Wall Street has consistently underestimated Palantir, so investors shouldn't simply follow analysts' opinions. Here's a closer look at both companies.
Image source: Getty Images.
Nvidia: 30% upside implied by Wall Street's median target price
Nvidia reported encouraging financial results in the first quarter of fiscal 2026, which ended in April. Revenue increased 69% to $44 billion, and non-GAAP net income increased 33% to $0.81 per diluted share. Importantly, adjusted earnings would have increased 57% had it not been for a write-down related to semiconductor export restrictions.
The investment thesis for Nvidia is simple: The company holds more than 80% market share in data center graphics processing units (GPUs), chips used to accelerate complex workloads like artificial intelligence (AI). Morgan Stanley analysts think the company can maintain 80%+ market share for the foreseeable future.
Importantly, Nvidia also has a booming networking business. In fact, the chipmaker is the market leader in InfiniBand platforms, which are presently the preferred connectivity technology for back-end AI networks. And it recently added Alphabet's Google and Meta Platforms as customers. Put simply, Nvidia is the company best positioned to capitalize on demand for AI hardware.
However, Nvidia is battling headwinds related to semiconductor export restrictions. The Trump administration recently revoked the AI Diffusion Rule, but it also banned the unlicensed sale of H20 GPUs to China, which effectively stops the company from participating in that market. Nvidia wrote down $4.5 billion in H20 inventory during the first quarter, and management says it will lose $8 billion in revenue in the second quarter.
Nevertheless, Wall Street estimates that Nvidia's adjusted earnings will increase 44% in fiscal 2027, according to LSEG. That estimate makes the current valuation of 43 times earnings look cheap. I wholeheartedly agree with Wall Street's rating on Nvidia. Patient investors should feel comfortable buying a position at the current price.
Palantir Technologies: 23% downside implied by Wall Street's median target price
Palantir reported strong Q1 financial results. Customers climbed 39% to 769 and the average existing customer spent 124% more. Revenue soared 39% to $884 million, the seventh straight acceleration, and non-GAAP earnings increased 62% to $0.13 per diluted share.
The investment thesis for Palantir centers on its unique software architecture, which not only lets customers pull nuanced insights from complex data, but also creates a feedback loop that yields insights that improve over time. The International Data Corp. (IDC) has recognized Palantir as the market leader in decision intelligence software.
Palantir also says its software architecture is unique in its ability to operationalize artificial intelligence, meaning its platforms can help clients move AI applications from prototype to production more effectively than other solutions on the market. Forrester Research recently ranked Palantir as a technology leader in AI platforms, awarding it higher scores than peers like Google and Microsoft.
However, not even the best business is worth buying at any price, and Palantir commands a very rich valuation. The stock currently trades at 285 times adjusted earnings. This looks particularly expensive because Wall Street estimates that the company's earnings will increase just 26% in the current year.
Here's the bottom line: Palantir is an excellent company and I believe it will be worth more in the future, but I also think the risk-reward profile is heavily skewed toward risk at the current price. So, prospective investors should wait for a better buying opportunity, but current shareholders comfortable with volatility can sit tight.
