Investors are starting to grumble about the noteworthy valuations of top artificial intelligence (AI) stocks. However, a closer look reveals those valuations may be bargains in disguise.
Why? The AI gold rush has entered a new phase. What started as speculative hype has transformed into concrete financial results, with revenue growth accelerating and profit margins expanding across the space. While investors worry about stretched valuations, the three companies discussed below are delivering AI-driven growth that justifies premium prices.
Image source: Getty Images.
A core AI holding
Palantir Technologies (PLTR -0.33%) posted 39% year-over-year revenue growth in Q1 2025 to $884 million. U.S. commercial revenue, a key driver, surged 71% year over year. Management guided full-year 2025 revenue to a range of $3.89 billion to $3.9 billion, representing approximately 36% growth.
The company highlighted strong AI demand, with both commercial momentum and margins accelerating. In Q1 2025, 55% of Palantir's revenue came from government contracts, providing a stable base. The accelerating commercial growth has led to Palantir trading at premium multiples, often exceeding 250 times forward earnings, which is a valuation level that typically deters traditional value investors.
While CEO Alex Karp's shareholder letters are known for their unconventional style, the company's financial performance, particularly the rapid growth in U.S. commercial revenue and expanding margins, is a primary focus for many investors.
The quiet AI giant
Amazon (AMZN 1.26%) doesn't get the AI credit it deserves. While Microsoft Azure and Alphabet's Google Cloud dominate headlines, Amazon Web Services (AWS) has quietly carved out a dominant position in the cloud economy -- and serves as a key backbone of AI infrastructure worldwide.
AWS crossed $100 billion in annual revenue for the first time in 2024, growing 19% to $107.6 billion. More importantly, operating income soared from $24.6 billion to $39.8 billion -- a margin-expansion story hiding in plain sight. The company plans to spend $100 billion on AI infrastructure in 2025 alone.
CEO Andy Jassy sees AWS evolving from a "multi-$100 billion business" to something much larger, as 85% of global IT spending remains on-premises. The AI opportunity accelerates this shift.
AWS already generates billions from AI services with triple-digit growth rates. Trading at under 25 times projected 2027 earnings, Amazon offers compelling risk-reward in cloud AI at a reasonable valuation.
There are 1 billion AI users (and counting)
Meta Platforms (META -1.34%) effectively addressed skeptics with its robust Q1 2025 results. The company reported a 16% increase in revenue to $42.3 billion, while earnings per share surged 37% to $6.43, comfortably exceeding analyst estimates.
A key highlight was the rapid adoption of Meta AI, which reached nearly 1 billion monthly active users, underscoring the company's ability to develop and scale consumer AI products globally. AI-driven ad enhancements also contributed meaningfully, lifting the average price per ad by 10%, alongside 5% year-over-year growth in ad impressions.
Meta's commitment to AI leadership is reflected in its planned $64 billion to $72 billion investment in AI infrastructure during 2025. The company's Llama open-source models position Meta uniquely within the AI ecosystem, fostering both developer engagement and commercial leverage. Additionally, the company's Advantage+ suite has demonstrated clear value for advertisers, delivering a 46% lift in incremental conversions during testing.
Despite its scale and aggressive investment, Meta's valuation remains attractive, trading at just 23 times projected 2027 earnings. Coupled with double-digit revenue growth and a wide competitive moat, the stock appears undervalued, relative to many AI-focused peers.
