Nvidia (NVDA) and Palantir Technologies (PLTR), two companies that experienced notable growth in 2024 due to the surging demand for artificial intelligence (AI) hardware and software, are navigating different market conditions in 2025. While both companies are positioned to benefit from the expanding AI sector, their stock performances and valuations present distinct investment considerations. Nvidia’s stock has seen a retreat of nearly 14% in 2025,while Palantir,after a strong start to the year,has also lost ground recently. despite these fluctuations,both companies remain key players in the AI landscape,driven by the robust demand for AI hardware and generative AI software,respectively.

the artificial intelligence boom continues to reshape the technology landscape, creating both opportunities and challenges for investors. Understanding the nuances of each company’s position within the AI ecosystem is crucial for making informed investment decisions. This article delves into the strengths and weaknesses of Nvidia and Palantir,providing a extensive analysis to help investors navigate the complexities of the AI stock market.

The Case for Nvidia

Concerns have arisen regarding Nvidia’s ability to sustain its growth, stemming from factors such as export controls on its AI graphics processing units (GPUs), a potential slowdown in AI infrastructure spending, and competition from custom processors adopted by tech giants aiming to reduce AI expenses. These concerns have contributed to market volatility and a reassessment of Nvidia’s future prospects.

However, Nvidia’s recent quarterly results indicate that the demand for its AI chips remains strong. In the fourth quarter of fiscal 2025, which ended on Jan. 26, nvidia’s revenue increased by 78% year over year, reaching a record $39.3 billion. Adjusted earnings also saw a significant increase of 71% to $0.89 per share. These figures surpassed Wall Street’s expectations, demonstrating the company’s continued dominance in the AI hardware market.

The company’s guidance suggests continued momentum, projecting $43 billion in revenue for the current quarter, representing a 65% increase from the prior-year period.Nvidia’s ability to ramp up the supply of its latest generation Blackwell processors coudl lead to exceeding these expectations, driven by strong customer demand. The Blackwell processor is poised to further solidify nvidia’s position as a leader in AI technology.

The Blackwell processor is expected to solidify Nvidia’s dominance in the AI chip market due to its versatility. According to management on the latest earnings conference call, Blackwell addresses the entire AI market from pretraining, post-training to inference across cloud, to on-premise, to enterprise. This comprehensive approach positions Blackwell as a key component in various AI applications, ensuring Nvidia’s continued relevance across the industry.

Nvidia anticipates that the emergence of low-cost reasoning models, such as DeepSeek’s R1, will significantly increase computing demand. The Blackwell architecture is designed to handle these demands efficiently,processing requests 25 times faster at a 20 times lower cost compared to the previous generation H100 processor. This positions Nvidia to maintain its dominant share of approximately 85% in the AI chip market.

Analysts have afterward raised their revenue growth expectations for Nvidia for the current and next two fiscal years. Despite near-term margin pressure from ramping up Blackwell production, Nvidia anticipates its adjusted gross margin to return to the mid-70% range later in the fiscal year from the current low-70% range. This indicates confidence in the company’s ability to manage costs and maintain profitability as it scales up production of its latest technology.

As Blackwell production fully ramps up,Nvidia’s earnings are expected to grow at an accelerated pace,potentially exceeding analysts’ expectations. This potential for accelerated growth makes Nvidia an attractive investment option for those seeking exposure to the AI hardware market.

The Case for Palantir Technologies

Palantir Technologies is a leading provider of AI software platforms, a market projected to experience substantial growth. Market research firm IDC estimates that the global AI software platforms market will grow from $28 billion in 2023 to $153 billion in 2028, representing an annual growth rate exceeding 40%.This rapid expansion underscores the significant potential for companies like Palantir in the AI software space.

This rapid market expansion is already positively impacting Palantir’s performance. The company’s revenue growth accelerated to 29% in 2024, up from 17% in 2023. With a top line of just under $2.9 billion last year, Palantir has significant growth potential given the size of the AI software platforms market. This growth trajectory highlights Palantir’s ability to capitalize on the increasing demand for AI-driven software solutions.

Palantir’s rate of signing new contracts is aligning with the projected growth rate of the AI software platforms market. The company reported a 40% year-over-year increase in its remaining deal value (RDV) in the fourth quarter of 2024, reaching $5.4 billion. This is a notable enhancement from the 22% year-over-year increase in the third quarter. The increasing RDV indicates strong future revenue potential and growing customer confidence in Palantir’s offerings.

RDV, representing the total value of palantir’s unfulfilled contracts at the end of a quarter, indicates that the company is securing contracts at a faster pace than it is indeed fulfilling them, setting the stage for stronger revenue and earnings growth. The company’s revenue pipeline is expected to continue improving as new customers tend to sign larger contracts over time, leveraging the efficiency gains provided by Palantir’s Artificial intelligence Platform (AIP). This platform is designed to streamline operations and enhance decision-making, making it an attractive solution for businesses across various industries.

Palantir’s overall customer count increased by 43% year over year in the previous quarter. As these customers expand their deployment of Palantir’s AIP, the company should see further growth in its RDV. Increased spending by existing customers is also contributing to margin improvements. Palantir’s adjusted operating margin increased by 11 percentage points year over year last quarter, leading to a 64% increase in adjusted earnings in 2024, reaching $0.41 per share. These improvements in profitability demonstrate Palantir’s ability to scale its operations efficiently and generate strong financial results.

Analysts anticipate Palantir to maintain strong double-digit earnings growth, with potential to exceed expectations due to its rapidly improving revenue pipeline and margin improvements. This optimistic outlook makes Palantir an appealing investment option for those seeking exposure to the AI software market.

The Verdict

Both Nvidia and Palantir offer investors exposure to the lucrative AI market, with Nvidia focusing on AI hardware and Palantir on generative AI software. While both companies could be valuable additions to a diversified portfolio, Palantir’s valuation is significantly higher compared to Nvidia, despite Nvidia’s faster growth rate. This valuation difference is a key consideration for investors when evaluating the potential returns and risks associated with each stock.

Palantir’s high valuation has raised concerns about whether the stock has become overvalued, contributing to its recent pullback. Analysts project Palantir to deliver gains of just 15% in the next year, based on a median price target of $97. In contrast, Nvidia is expected to increase by 51% over the next 12 months, according to analysts. This disparity in projected growth highlights the potential for Nvidia to deliver greater returns in the near term.

Nvidia’s lower valuation and faster expected earnings growth this year could lead the market to reward it with greater upside compared to Palantir, making it a potentially more attractive investment option at this time.However, investors should carefully consider their risk tolerance and investment goals before making any decisions. Both Nvidia and Palantir offer unique opportunities within the AI market,and a diversified approach might potentially be the most prudent strategy.