In the epic fantasy series The Lord of the Rings, a palantir is described as a crystal sphere that allows a person to view events happening far away, both in the present and in the past. However, this magical object wasn't a crystal ball that enabled one to see the future.
We don't need a palantir to recognize the success achieved by the company that bears the name of J.R.R. Tolkien's imaginary creation, Palantir Technologies (PLTR +0.36%). The artificial intelligence (AI) software stock was one of the biggest winners of last year.
Will Palantir continue its momentum through 2026? That remains to be seen. However, I predict that two AI stocks will be worth more than Palantir by the end of the year.
Image source: Getty Images.
One of the easiest predictions ever made
Do I need a crystal ball or another fortune-telling device? Nope. I predict that Alphabet (GOOG +0.96%) (GOOGL +1.02%) and Nvidia (NVDA 0.05%) will be significantly larger than Palantir by the end of 2026.
Granted, this is one of the easiest predictions ever made. Palantir's market cap currently stands well below $450 billion. Alphabet's market cap is knocking on the $4 trillion mark, while Nvidia's market cap is around $4.6 trillion.
We'd have to see an incredible surge from Palantir and an equally incredible meltdown for Alphabet and Nvidia for my prediction to fall flat. I don't see that happening this year.
Las Vegas oddsmakers usually give point spreads for athletic games to make betting on uneven matchups more appealing to gamblers. Even if we assigned "point spreads" to Alphabet and Nvidia by handicapping their market caps by $2 trillion, I'd still go with both stocks over Palantir.
NASDAQ: PLTR
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Why choose Alphabet and Nvidia?
Why did I make such an easy prediction by choosing Alphabet and Nvidia? Frankly, I think they're better AI stocks than Palantir is.
Don't get me wrong. I view Palantir as a highly innovative company. Its software is of the highest caliber. Achieving a Rule of 40 score of 114% is unquestionably impressive.
However, Alphabet offers a way to invest in multiple aspects of AI, whereas Palantir presents a more singular focus. Google Cloud is the obvious AI angle with Alphabet. It's the fastest-growing of the three largest cloud service platforms.
NASDAQ: GOOGL
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Alphabet is also integrating generative AI throughout its products. Waymo is the clear leader in AI-powered robotaxis. Major customers are even choosing Google's Tensor Processing Units (TPUs) instead of Nvidia's GPUs to run their AI applications.
Even with the inroads made by Google's TPUs, though, Nvidia remains the king of the AI chip market. The company also has significant opportunities in self-driving cars, digital twins, and robotics.
Additionally, it could grow faster than Palantir. Nvidia expects sales to jump 14% sequentially in the fourth quarter of 2025, while Palantir projects quarter-over-quarter sales growth of 12.7% at the high end of its guidance range.
NASDAQ: NVDA
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The biggie, however, is valuation. Palantir sports a nosebleed-level forward price-to-earnings (P/E) ratio of 178.6. Alphabet's forward earnings multiple is 28.2, with Nvidia's forward P/E of 24.5 looking relatively cheap, by comparison.
Are Alphabet and Nvidia good stocks to buy now?
Just because Alphabet and Nvidia will almost certainly be worth more than Palantir by the end of 2026 doesn't make them good stocks to buy now. And even if my opinion that they're better AI stocks than Palantir is correct, Alphabet and Nvidia wouldn't necessarily be good stocks to add to your portfolio. But I think they are – at least for many investors.
I expect the mighty AI tailwind to continue blowing for both Alphabet and Nvidia throughout this year and beyond. The adoption of agentic AI seems likely to help organizations begin realizing significant returns on their AI investments.
Yes, this same tailwind will also remain at Palantir's back. However, Palantir has a valuation problem that doesn't exist for Alphabet and Nvidia. For now, it seems these are -- to paraphrase Tolkien -- the two AI stocks to rule them all.
