Palantir Technologies has delivered outstanding gains of 135% to investors in 2025 as of this writing, but it looks like the company's valuation is going to weigh on its stock price. This explains why the stock fell 8% despite reporting strong third-quarter results that beat expectations.
The artificial intelligence (AI) software specialist even raised its full-year guidance, but that wasn't enough to boost investor confidence. It is easy to see why: Palantir is trading at a whopping 116 times sales and 189 times forward earnings.
It may eventually justify those expensive multiples thanks to a rapidly growing revenue pipeline and the huge opportunity available in the AI software space, but it looks like the stock may remain under pressure in the near term due to the valuation. This is why there is a good chance of Advanced Micro Devices (AMD 4.22%) overtaking Palantir's valuation by the end of the year.
Let's see why that's likely to be the case.
Image source: Getty Images.
AMD is very close to Palantir right now
Palantir is the world's 23rd largest company with a market cap of $424 billion. AMD is eight spots lower with a market cap of $380 billion -- just 12% lower than Palantir's.
NASDAQ: AMD
Key Data Points
AMD's valuation is way more attractive right now. It is trading at just under 12 times sales and has a trailing price-to-earnings ratio of 122. The forward earnings multiple of 38, however, is way more attractive and points toward a significant increase in its bottom line.
If investors decide to continue booking profits in Palantir stock because of its sky-high valuation, the gap between their market caps could narrow further. AMD's multiple AI-related catalysts are boosting its growth, as evident from the company's latest quarterly report. That could lead to increased demand for the stock, even though it has shot up 93% so far in 2025 as of this writing.
The further boost could come following its latest quarterly report. Healthy growth in the data center and personal computer (PC) markets, along with strong prospects in both these areas, indicates that more upside could be in the cards for the shares this year, which might be enough for it to overtake Palantir's market cap by the end of 2025.
The chip designer seems set to end the year on a strong note
Third-quarter results, reported on Nov. 4, showed a 36% year-over-year increase in its revenue to $9.25 billion. That was well above its original estimate of $8.7 billion. Earnings jumped 30% to $1.20 per share.
AMD's strong performance was driven by solid contributions from its data center, client, and gaming segments. Data center revenue jumped 22% from the year-ago period to $4.3 billion, driven by an improvement in demand for both its server central processing units (CPUs) and data center graphics processing units (GPUs).
The client and gaming segment did even better, posting 73% year-over-year growth to $4 billion. AMD saw an increase in sales of both its PC CPUs and semi-custom chips that are deployed in gaming consoles. The company is expecting $9.6 billion in revenue in the current quarter, which would be a 25% improvement over the fourth quarter of 2024.
It could do better than that. The demand for AMD's data center products to run AI workloads in the cloud is picking up impressively. CEO Lisa Su said on the latest earnings call that her company saw "record sales as hyperscalers expanded EPYC CPU deployments to power both their own first-party services and public cloud offerings." She added that the number of cloud instances (virtual access to computing resources) powered by AMD's server CPUs has jumped by 50% from last year.
Management expects the strong momentum in the server CPU business to continue as hyperscalers are significantly increasing their general-purpose computing capacity as they scale up AI workloads. As a result, the company now sees stronger demand for CPUs in the coming years.
Meanwhile, the GPU side of its data center business should also pick up pace on the back of multiple deployments by cloud and AI companies. Oracle, for instance, is set to offer cloud instances powered by AMD's MI355X AI GPUs to run real-time AI inference applications in the cloud. Importantly, AMD believes that its data center business is set to enter a new phase of growth from next year with the launch of its MI400 GPUs.
The company has already landed a major customer in OpenAI for deploying 6 gigawatts (GW) of its data center GPUs from the second half of 2026. This deal could boost AMD significantly and set the company up for years of healthy growth.
Not only does AMD have the potential to overtake Palantir's market cap by the end of next month, but it also has the ability to carry forward its momentum into 2026 and deliver more gains to investors after a stellar performance this year.
