Palantir Technologies (PLTR +1.25%) has taken to calling itself an "n of 1." Based on its stock performance so far this year, management may want to change the phrase to an "n of negative 1."
Despite a significant pullback, Palantir's valuation remains astronomical, with shares trading at 128 times forward earnings. Should you forget Palantir and buy two other artificial intelligence (AI) stocks?
Image source: Getty Images.
Nvidia: Ready for the Rubin revolution
Unlike Palantir, Nvidia (NVDA 1.53%) doesn't look overly pricey. The stock's forward earnings multiple is 24.5. Considering Nvidia's growth prospects, that valuation isn't scary whatsoever.
The company's growth seems likely to continue with the upcoming launch of the Rubin platform in the second half of 2026. Rubin will support inference at a cost of up to 10x lower than Nvidia's wildly successful Blackwell GPUs. It will also enable training massive mixture-of-experts models with 4x fewer GPUs.
NASDAQ: NVDA
Key Data Points
What about the threat of an AI bubble? Nvidia CEO Jensen Huang said in November, "From our vantage point, we see something very different." I think he's right. The demand for powerful AI chips will likely grow rather than wane. Nvidia is well-positioned to be the biggest winner from this trend.
Advanced Micro Devices: A Credible Challenger
If you're interested in investing in GPU stocks, you should also consider the most significant credible challenger to Nvidia -- Advanced Micro Devices (AMD 3.46%). Even though AMD trades at nearly 32 times forward earnings, the stock still looks like a bargain compared to Palantir.
AMD's Instinct MI400 chips could give Nvidia's Vera Rubin chips a run for their money. MI400 will match Vera Rubin in compute performance and memory bandwidth, but will feature 1.5 times the memory capacity and 1.5 times the scale-out bandwidth.
NASDAQ: AMD
Key Data Points
AI hyperscalers don't like having all their eggs in one basket with Nvidia. I predict that AMD's stock will resume its tremendous momentum from last year once its MI400 chips hit the market.
Software vs. Silicon
Usually, I'd say that in a battle between software and silicon, software will emerge as the winner. However, this outcome assumes similar valuations. Palantir has a great product. Its growth is impressive. The company's underlying business is strong. Unfortunately, though, its stock is priced for perfection. I don't think any company can sustainably achieve that high bar.
Nvidia and AMD should benefit from continued GPU demand. And they don't have to be perfect to deliver market-beating returns.
