Palantir Technologies (PLTR 2.59%) continues to rip higher, a fun and potentially life-changing ride for anyone who has bought and held over the past couple of years.
But buying the hottest stock on Wall Street only works until it doesn't -- nothing goes up forever. Palantir's valuation is at precarious heights, so investors looking to put new money to work may be better off looking to other artificial intelligence (AI) stocks.
That doesn't mean sacrificing on quality. There are several companies at the cutting edge of the AI boom trading at reasonable valuations that stand to deliver outsize investment returns over the long term.
Here are three prime examples to consider. All three could have far more upside than Palantir at their current prices.
Image source: Getty Images.
1. Nvidia's valuation remains reasonable despite a similar run
Investors looking for the market's top performers should look no further than Nvidia (NVDA -0.12%). The company's graphics processing units (GPUs) are the industry standard chips used in massive data centers to train and operate power-hungry AI models.
The stock has returned over 900% in the past three years, but the company's sales and earnings have largely kept pace with the share price, preventing the valuation from becoming too high.
Analysts expect the chipmaker to grow earnings by an average of 29% annually over the long term. The stock's current price-to-earnings ratio of 56 is still very reasonable for that growth. The business must still perform to those expectations, but the signs are encouraging.
Data center investments are poised to continue. McKinsey & Company is forecasting over $7 trillion in spending over the next five years, with more than $5 trillion of that allocated for processing AI loads.
And the government is easing its export restrictions on Nvidia, paving the way for the company to resume selling its H20 chips to China. It all bodes well for the stock.
2. Alphabet's recent rise can continue
Google's parent company, Alphabet (GOOG 0.45%) (GOOGL 0.54%), has been on a hot streak lately. Shares have risen about 15% over just the past month.
Concerns over regulatory threats and AI disruption to the company's core search engine business had weighed on the stock earlier this year. But Google Search revenue's 11.7% growth year over year in the second quarter of 2025 shows that the core business isn't done yet.
Barring drastic actions from regulators, it's doubtful that the Google ecosystem will disappear overnight. For now, investors can shift their attention to the positive developments at Alphabet, such as its progress in AI; surging cloud computing profits; and the steady expansion of Waymo, its autonomous ride-hailing service. It remains a juggernaut in the tech sector that few companies can match.
Lastly, the company's growth prospects look solid. Analysts have lowered their long-term estimates over the past year but still expect over 14% annualized earnings increases. At a price-to-earnings ratio (P/E) of just 21, there is still enough value here for the stock to continue building on its recent momentum.
3. ASML seems poised for a rebound
For all the excitement AI has generated among investors, ASML Holding (ASML -1.85%) struggled, with its stock tumbling 24% over the past year. The company is crucial to the AI landscape as the only one that builds extreme ultraviolet lithography (EUV) machines, which are essential for printing complex patterns on high-end microchips used for AI and in other cutting-edge applications.
ASML's headaches stem from the uncertainty of tariff policies. It disrupted its business, prompting management to issue a cautious outlook for next year, despite posting a strong second quarter. It now trades at a P/E of 26, a valuation rarely this low over the past 10 years.
The stock's decline could be an excellent buying opportunity. Taiwan Semiconductor Manufacturing's recent strong quarter highlights the ongoing demand for AI chips, and analysts still expect ASML to grow its earnings by an average of 17% annually over the long term. In other words, tariffs may delay spending on the company's equipment in some cases, but they are unlikely to stop it. Look for a rebound once the tariff situation becomes clearer.
