Since late 2022, no investment trend has been hotter on Wall Street than the evolution of artificial intelligence (AI). Allowing AI-empowered software and systems to make split-second decisions and grow more efficient at their tasks over time is a game-changing technology that offers utility in most industries around the globe.
In Sizing the Prize, the analysts at PwC pegged AI's worldwide addressable market at a whopping $15.7 trillion come 2030. Even if this estimate is only remotely in the ballpark, it would lead to a long list of companies benefiting from the rise of AI.
Image source: Getty Images.
Semiconductor giant Nvidia is often viewed as the face of the AI revolution. It's become the largest public company as a result of insatiable enterprise demand for its Hopper (H100) and successor Blackwell graphics processing units.
But an argument can be made that AI-driven data-mining specialist Palantir Technologies (PLTR +0.55%) is now Wall Street's favorite AI stock. Since the start of 2023, shares of Palantir have soared by 1,940% and it's become one of the most-influential tech companies, with a market cap of more than $300 billion. But this doesn't mean other influential businesses won't surpass its valuation in the years to come
Palantir's ascent to the top of the AI pedestal may be short-lived
On one hand, Palantir does offer a sustainable moat. The company's Gotham and Foundry platforms aren't replicable at scale by any other companies, which means Palantir doesn't have to worry about having its clients stolen by other businesses.
Further, Gotham is known for landing multiyear government contracts, and Foundry is an enterprise-based subscription model, which suggests the company's operating cash flow is highly predictable.
NASDAQ: PLTR
Key Data Points
However, Palantir is butting heads with historical headwinds that have a flawless track record of eventually weighing down even the most high-flying companies.
For example, every next-big-thing trend for three decades, including the advent of the internet, has endured a bubble-bursting event early in its expansion. Investors frequently overestimate the early innings utility and adoption of game-changing technologies, and artificial intelligence likely isn't an exception. While Palantir's multiyear government contracts and subscriptions would buoy near-term sales, negative investor sentiment would likely weigh on its stock.
The other issue for Palantir is its valuation. Whereas megacap companies on the leading edge of next-big-thing trends have historically topped out at price-to-sales (P/S) ratios of 30 to 43 over the last three decades, Palantir's P/S ratio is pushing above 104, as of this writing on July 1. This isn't sustainable and suggests that Palantir's market cap will plunge in the coming years.
As Palantir stock (presumably) comes back to Earth, three magnificent growth and/or value stocks will have the opportunity to leapfrog it by 2028.
NYSE: PFE
Key Data Points
Pfizer: current market cap of $142 billion
The first amazing business that's only growing stronger and has all the tools necessary to become a more valuable company than Palantir over the next three years is pharmaceutical behemoth Pfizer (PFE 1.52%).
What's odd about Pfizer stock recently hitting a 13-year low is that it's been punished for its own success. With combined sales of Pfizer's COVID-19 drugs plummeting from north of $56 billion in 2022 to $11 billion in 2024, recency bias has weighed down its shares.
But if investors widen their lens and look at Pfizer's product portfolio since this decade began, it's a completely different story. When 2020 ended, Pfizer didn't have any sales from its COVID-19 franchise and full-year revenue came in at $41.9 billion. When 2024 came to a close, Pfizer had $11 billion in COVID-19 sales and $63.6 billion in product sales. That's 52% growth in net sales spanning just four years for a mature pharmaceutical company.
Pfizer's oncology segment is a more specific reason its valuation can head higher. The $43 billion acquisition of cancer-drug developer Seagen in December 2023 vastly expands Pfizer's cancer-drug pipeline, as well as enhances its pricing power. Management has also previously pointed out that cost synergies from the combination will bolster the company's margins in the years following the deal.
With the assumption that cancer screening tools continue to improve and access to medical care expands worldwide, Pfizer should have no trouble delivering for its patient shareholders over the next three years, if not well beyond.
Image source: Getty Images.
PayPal Holdings: current market cap of $73 billion
Despite Palantir being worth more than four times as much as fintech giant PayPal Holdings (PYPL 1.82%), as of July 1, the latter offers a far more attractive risk-versus-reward profile over the coming three years.
Even with competition in the digital payment space picking up, PayPal continues to be in the driver's seat for a technology that offers sustained double-digit growth potential. Developed and emerging markets shifting away from traditional cash payments to digital infrastructures affords PayPal and its peers a seemingly limitless ceiling.
With few exceptions, PayPal's key performance indicators have been moving in the right direction since this decade began. Total payment volume (TPV) has surged from a reported $936 billion in 2020 to an annual run rate of $1.67 trillion, based on PayPal's first-quarter TPV. What's more, active customers are considerably more engaged, with the average number of payments over the trailing-12-month period climbing from 40.9 in 2020 to 59.4, as of the end of March 2025. This is a recipe for gross margin expansion.
Innovation is another key puzzle piece for PayPal to eventually leapfrog Palantir in the valuation department. The potential to further monetize buy now, pay later solutions, as well as leverage AI to personalize its platforms for users, are just some of the ways innovation can reaccelerate PayPal's organic growth.
The company's valuation also provides a launching point for its stock. Whereas Palantir is trading at a nosebleed P/S ratio of 104, PayPal has a forward price-to-earnings ratio of just 13, along with a storied history of blowing past its own conservative expectations.
NASDAQ: ISRG
Key Data Points
Intuitive Surgical: current market cap of $193 billion
The third magnificent stock that can surpass Palantir's market cap by 2028 is robotic-assisted surgical systems developer Intuitive Surgical (ISRG 0.81%).
The beauty of healthcare stocks (this includes Pfizer) is that they're highly defensive. Regardless of what's happening with the U.S. economy and stock market, people still come down with ailments and require medical care. Steady demand for everything from prescription medicine to medical devices and surgical procedures ensures that companies like Intuitive Surgical can deliver predictable growth year after year.
On a more company-specific basis, Intuitive Surgical holds the lion's share of the robotic-assisted surgical market. Including the 367 da Vinci systems placed during the first quarter, it's now installed 10,189 systems since this century began. No other surgical device company is remotely close to this figure.
What's more, buyers and lessees of da Vinci systems have typically invested a lot of surgical training time and money into these systems. In short, purchasers tend to remain clients for a very long time.
But the best thing about Intuitive Surgical is, arguably, its revenue breakdown. Throughout the 2000s, selling its high-priced but mediocre-margin da Vinci surgical system accounted for the bulk of its revenue. Nowadays, selling instruments and accessories with each procedure, along with servicing its systems, accounts for a majority of full-year revenue. These are considerably higher margin categories, which has led to earnings growth (often) outpacing sales growth.
Intuitive Surgical should see its market cap climb as the general use case of the da Vinci surgical system is expanded over time.
