For the better part of the last three years, no trend has been hotter on Wall Street than the rise of artificial intelligence (AI). Giving software and systems the tools to make split-second decisions without human oversight is a game-changer for most industries around the globe.
Though a long list of companies has benefited from the evolution of AI, none are the face of the movement quite like graphics processing unit (GPU) kingpin Nvidia (NVDA +2.59%) and AI-driven data-mining specialist Palantir Technologies (PLTR 1.87%). Nvidia has gained more than $3.8 trillion in market value since the start of 2023, while Palantir stock has surged by roughly 2,250% over the same span.
Image source: Getty Images.
Nvidia and Palantir may be in a bubble
Nvidia's claim to fame is its Hopper and Blackwell GPUs, which account for the lion's share of GPUs currently deployed in AI-accelerated data centers. With AI-GPU scarcity persisting, Nvidia has enjoyed a sizable backlog for its hardware and has been able to consistently charge a triple-digit percentage premium for its GPUs, relative to its external competition.
Meanwhile, Palantir has benefited from its two AI-fueled platforms, Gotham and Foundry, being irreplaceable at scale. Federal governments rely on Gotham to support military mission planning and execution, as well as data analytics. As for Foundry, it helps businesses make sense of their data and assists in streamlining their operations. Gotham has played the biggest role in sustaining Palantir's sales growth and pushing the company to recurring profitability.
Despite this overwhelming success, there's a realistic chance that Nvidia and Palantir are both in a bubble.
NASDAQ: NVDA
Key Data Points
For starters, every next-big-thing innovation for more than three decades has endured an early innings bubble-bursting event. It takes time for all technologies to mature, and the vast majority of companies deploying AI solutions are nowhere close to having optimized them, as of yet. If an AI bubble forms and bursts, no two companies would arguably be hit harder than Nvidia and Palantir.
Their valuations are, potentially, an even bigger concern. Whereas most industry leaders on the cutting-edge of a next-big-thing technology have topped out at price-to-sales (P/S) ratios of 30 to 40, Palantir is nearing a P/S ratio of almost 121! As for Nvidia, it's approaching a P/S ratio of 29, which is more than double the trailing-12-month P/S multiple of any of its "Magnificent Seven" peers.
If history rhymes and the AI bubble bursts, other brand-name stocks will have an opportunity to leapfrog Nvidia ($4.18 trillion) and Palantir ($356 billion) in the valuation department by 2035. What follows are three magnificent stocks with valuations below both Nvidia and Palantir that can surpass them over the next 10 years.
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Alibaba Group: current market cap of $276 billion
One of the more logical candidates to leapfrog Nvidia and Palantir is China-based e-commerce and AI juggernaut Alibaba Group (BABA 0.27%), which is only $80 billion away from Palantir's market cap but a good $3.9 trillion below Nvidia.
Alibaba's foundational operating segment is its e-commerce marketplace. Based on a research report from DBS Treasures, Alibaba's Taobao and Tmall collectively accounted for an estimated 41% of China's gross merchandise value for online retail platforms in 2024. Even though online retail sales generate relatively low margins, China's burgeoning middle class sets Alibaba's e-commerce platforms up for sustained growth.
What's even more intriguing than Alibaba's online retail sales potential is its cloud infrastructure service platforms and artificial intelligence ties. Alibaba Cloud was responsible for one-third of all cloud infrastructure service spending in mainland China during the quarter ended in March, according to Canalys. The incorporation of generative AI solutions has the potential to accelerate and/or sustain double-digit sales growth for this considerably higher-margin segment.
Don't overlook Alibaba's pristine balance sheet, either. It closed out March with $59 billion in cash, cash equivalents, short-term investments, and equity securities, generating roughly $3.8 billion in net cash from its operating activities during the first three months of the year. Perhaps it's no surprise that Alibaba is supporting a healthy share repurchase program and is able to invest aggressively in an assortment of higher-growth and higher-margin innovations.
NASDAQ: PYPL
Key Data Points
PayPal Holdings: current market cap of $71 billion
A second magnificent stock with all the tools and intangibles needed to surpass Nvidia's and Palantir's respective market caps over the next 10 years is fintech leader PayPal Holdings (PYPL 1.61%). PayPal certainly has the biggest climb, with a current market of "just" $71 billion. But keep in mind that my forecast implies a commensurate decline in the valuations of both Nvidia and Palantir by 2035.
Based on estimates from research and consulting firm Roots Analysis, the global fintech addressable market is projected to grow from $222 billion in 2024 to north of $1.8 trillion by 2035. Though there's growing competition in digital payments, PayPal finds itself in pole position for this sizable global opportunity.
While PayPal's active account growth has left a bit to be desired over the last two years, most of its key performance indicators (KPIs) have been marching in the right direction. Since the end of 2020, total payment volume transacted on PayPal's digital platforms has expanded from $936 billion to an annual run rate of $1.67 trillion, based on its quarter ending in March 2025.
Meanwhile, the average number of payments completed by active accounts over the trailing-12-month period jumped from 40.9 to 59.4 during the same time frame. In other words, active accounts are substantially more engaged than they were a little over four years ago, which is a recipe for gross profit expansion over time.
The icing on the cake for PayPal, beyond its opportunity to expand into underbanked emerging markets, is its hearty capital-return program. PayPal has reduced its outstanding share count by more than 20% over the last decade, which should have a demonstrably positive impact on its earnings per share (EPS).
NASDAQ: ISRG
Key Data Points
Intuitive Surgical: current market cap of $184 billion
The third magnificent stock that has the potential to blow past Nvidia and Palantir by 2035 is robotic-assisted surgical systems developer Intuitive Surgical (ISRG 0.95%), which currently trails Palantir by about $172 billion and Nvidia by roughly $4 trillion.
The beauty of most healthcare stocks is their highly defensive nature. No matter how well or poorly the U.S. economy and/or stock market are performing, people will still develop ailments and require prescription drugs, medical devices, and preventative services/surgeries. This leads to steady operating cash flow year after year for most healthcare businesses.
On a more company-specific basis, Intuitive Surgical has a vice-like grip on the robotic-assisted surgical market share. The 367 da Vinci surgical systems placed during the first quarter pushed Intuitive Surgical beyond 10,000 system installations this century. While this might not sound like a huge number, the high cost of these systems, coupled with the time it takes to train surgeons to use the da Vinci surgical system, keeps buyers exceptionally loyal to the company.
Furthermore, Intuitive Surgical's revenue breakdown has become more favorable from a margin standpoint over time. During the 2000s, most of its revenue originated from selling its high-priced but costly-to-build da Vinci surgical system. Now, a majority of its sales come from instruments and accessories for procedures and system servicing. These are high-margin sales channels that are allowing EPS to grow at a faster pace than revenue.
The final puzzle piece is that its surgical systems are still just scratching the surface in terms of utility. Moving into thoracic, colorectal, and generalized soft tissue procedures opens new doors that can sustain a double-digit growth rate for perhaps the next 10 years, if not well beyond.
