Palantir Technologies (PLTR +1.66%) is coming off yet another strong quarterly result, where it not only beat expectations with ease, but also raised its guidance. And this time around, it was a substantial increase to the data analytics company's forecast for the year.
The growth rate for Palantir has been accelerating, and that has enabled it to generate incredible 152% returns this year. It has leveraged artificial intelligence (AI) to its advantage, providing its customers with more effective and efficient solutions. Palantir has undoubtedly been the hottest AI stock to own this year, but has it also become a better overall AI investment than the juggernaut that is Nvidia (NVDA +0.03%)?
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Palantir's growth has been more impressive than Nvidia's of late
Palantir has been a growth machine for several quarters. Every time doubters may think the business might be due for a slowdown, it manages to pump out strong results as it continues to prove them wrong.
On Nov. 3, the tech company did it yet again. Its reported third-quarter revenue of $1.18 billion for the period ended Sept. 30, which was more than the $1.09 billion that analysts were expecting. And its adjusted per-share earnings of $0.21 was also better than estimates of $0.17.
Not only was it a solid beat, but the company raised its revenue guidance for the full year to around $4.4 billion. That's a sizable increase from its full-year guidance back in August, when it was projecting sales to be around $4.1 billion. This past quarter, Palantir's top line rose by 63% year over year, which was an acceleration from the 48% growth it posted back in the second quarter.
By comparison, Nvidia's growth rate when it last reported earnings in August was 56% (for the period ended July 27). And a quarter earlier, it was 69%. While Nvidia has been slowing, Palantir's growth has been ramping up.
NASDAQ: PLTR
Key Data Points
Where Palantir trails Nvidia is in valuation
In terms of sheer growth, Palantir looks superior to the top chipmaker today. But a key advantage for Nvidia is on the bottom line. Its per-share profit is far higher, which is why, even though Nvidia is the most valuable company in the world, with a market cap of $4.8 trillion, its price-to-earnings multiple of 56, is far lower than the mammoth 430 times earnings that Palantir trades at (its market cap is around $450 billion). Valuation is important, because it more effectively puts how expensive a stock truly is into context, rather than just looking at share price or market cap alone.
A recent filing revealed that prominent hedge fund manager Michael Burry has put options on Palantir's stock, indicating he may be worried that it is overpriced and due for a decline. Palantir CEO Alex Karp was perplexed by the news and that people would take short positions on the stock.
"I do think this behavior is egregious and I'm going to be dancing around when it's proven wrong," Karp said on CNBC.
The bearish position on Palantir by Burry and other skeptics may explain why despite the company's seemingly strong results, the AI stock has been falling rather than rising in value.
NASDAQ: NVDA
Key Data Points
Palantir is hot, but Nvidia is still the safer long-term buy
There's no doubt that Palantir has been the better buy this year, but it has become a highly speculative stock to own. Although Nvidia isn't a cheap-looking stock based on earnings, at least its valuation is somewhat justifiable.
With Palantir, the premium is so incredibly high that it becomes a far riskier investment to be holding. That's why despite its impressive results, I'm still not convinced that Palantir's rally can continue. Investors are better off going with more of a sure thing in Nvidia.
