Nvidia (NVDA +1.02%) is on track to deliver another sizzling performance in 2025. The chipmaker's gain, though, won't come anywhere close to matching that of Palantir Technologies (PLTR 2.81%). Unless Palantir's stock implodes in the final trading days of the year, it should finish 2025 up more than 150%.
Does Palantir's momentum make it the more attractive choice going into the new year? I don't think so. Instead, I believe that Nvidia is the hands-down better stock to buy than Palantir for 2026.
Image source: Nvidia.
Two similar growth stories
Don't get me wrong: Palantir has an impressive growth story. In the third quarter of 2025, the software company reported that its total revenue increased 63% year-over-year and 18% quarter-over-quarter to $1.18 billion.
As it has in the past, Palantir continues to generate the majority of its revenue in the U.S. Over half of its U.S. revenue stems from contracts with the federal government. However, that might not be the case for much longer. The company's U.S. commercial revenue is growing at a much faster pace than its government revenue.
NASDAQ: PLTR
Key Data Points
Nvidia's growth is remarkably similar to that of Palantir. The GPU maker reported Q3 revenue of $57 billion, up 62% year-over-year and 22% quarter-over-quarter.
Which company has the stronger momentum as 2025 draws to a close? I'd give the nod to Nvidia, based on the revenue guidance from both companies. While Palantir forecasts quarter-over-quarter revenue growth of 12.5% in Q4, Nvidia projects quarter-over-quarter revenue growth of 14%.
NASDAQ: NVDA
Key Data Points
Both artificial intelligence (AI) leaders also have CEOs who hype their growth stories. Jensen Huang, founder and CEO of Nvidia, said in his company's Q3 update, "Blackwell sales are off the charts, and cloud GPUs are sold out." That seemed downright modest, though, compared to Palantir founder and CEO Alex Karp's proclamation that his company delivered an "unworldly growth rate" in the third quarter.
Two dissimilar valuations
I don't think that Nvidia's relatively small momentum advantage as 2025 draws to a close makes it a hands-down better stock to buy than Palantir in the new year. However, I believe that Nvidia's valuation does.
Granted, Nvidia doesn't seem to be cheap at first glance. The stock's forward price-to-earnings ratio is roughly 24.8. It's essential to factor in the company's growth prospects over the next few years, though. Nvidia's price-to-earnings-to-growth (PEG) ratio, based on analysts' five-year growth projections, is only 0.72, according to Yahoo! Finance. Any PEG multiple below 1.0 is typically considered an attractive valuation.
On the other hand, Palantir's valuation looks downright scary. The AI and data analytics software stock trades at 192.3 times forward earnings. Yes, Palantir's outstanding growth helps make its valuation somewhat more palatable. However, the stock's PEG ratio remains over 3.0, indicating that it appears to be significantly more expensive than Nvidia, even with growth projections taken into account.
Karp tried to shrug off his company's sky-high valuation in his Q3 letter to Palantir shareholders, stating, "It has indeed been difficult for outsiders to appraise our business, either its significance in shaping our current geopolitics or its value in the vulgar, financial sense." The problem, as I see it, with his perspective, though, is that valuing stocks must always be done using financials, whether one views doing so as vulgar or not.
Risk vs. reward
Ultimately, investing comes down to trading risk in exchange for potential rewards. Which of these two stocks provides the better risk-reward proposition? I think the answer is clearly Nvidia.
Although Palantir's revenue growth is impressive (and perhaps even "unworldly," as Karp argues), it's essentially on par with that of Nvidia. However, Nvidia's stock trades at a much lower valuation. That's true whether we incorporate growth projections for one year or five years from now.
To be sure, Nvidia faces some risks. The AI infrastructure boom could slow down. Customers could increasingly turn to chips from rivals. But these are "maybe" kind of risks. Palantir's valuation risk isn't so speculative.
