Considering Palantir, perhaps it's wiser to explore investing in these two tech companies as alternatives.
Palantir Technologies (PLTR 1.06%) was the standout performer in the S&P 500 last year, with its AI platform gaining traction. Companies are testing its workflow and application-focused AI solution, and it sees a big opportunity as clients transition from proof of concept to production. However, the stock's strong performance leaves it with an inflated valuation, trading at a forward P/S ratio of 40 times fiscal 2025 estimates for a company that recently reported a 30% revenue growth. Palantir execs, including the CEO, chairman, and CTO, among others, have been offloading shares lately.
On the other hand, AI powerhouses Nvidia (NVDA 2.63%) and Salesforce (CRM -1.00%) offer more appealing valuations. Let's explore these two stocks.
Nvidia: The AI Infrastructure Leader
As GPUs have become fundamental for AI, Nvidia has reaped the benefits. With Q4 earnings surging 94%, its stock continues to trade at a reasonable P/E ratio of less than 31 and a PEG ratio around 0.96. Nvidia's huge opportunity lies in the exponential growth of AI models, which require exponentially more computing power and GPUs for training. For instance, Meta Platforms' and xAI's Grok models have moved from 16,000 and 20,000 GPUs to 160,000 and 200,000 GPUs, respectively. Future models may even require clusters of up to 1 million GPUs. As the dominant GPU provider, Nvidia is in a prime position to profit from this AI infrastructure buildout.
With CUDA software, Nvidia has established a stronghold in the AI space. As the first GPU company to release software for non-graphics-rendering tasks, it quickly became the industry standard. Its addition of AI-specific microlibraries and developer tools further enhances CUDA's significance.
Salesforce: AI Software with Potential
Salesforce offers an appealing alternative to Palantir's high valuation with its stock trading at 7.7 times next year's analyst estimates. Salesforce has an exciting AI opportunity with Agentforce, aiming to become the market leader in agentic AI. Unlike generative AI, which provides the best course of action, agentic AI autonomously performs tasks with minimal human intervention. Salesforce's Agentforce solution can handle tasks across various industries, such as retail customer service or billing complaints, with potential usage-based pricing starting at $2 per conversation.
The company already has 200 Agentforce deals secured since its October launch and a promising pipeline of thousands of potential deals. Its recent Agentforce 2.0 release includes no-code platform capabilities, the ability to work outside its product suite, and integration with Slack. Salesforce isn't growing at the same pace as Palantir, but it presents a cheaper valuation and an exciting AI opportunity.
Palantir's strong financial performance in 2021 has led some executives to sell their shares, despite the company's potential in the AI sector. In contrast, the stocks of Nvidia and Salesforce offer more attractive valuations for investors looking to invest in finance and AI.
Nvidia's strong earnings in Q4 and its position as the dominant GPU provider for AI make it a prime candidate for profitability in the growing AI market. With Meta Platforms and xAI currently requiring large numbers of GPUs for their AI models, the need for even more powerful GPUs in the future is evident, and Nvidia is well-positioned to capitalize on this demand.
Salesforce, on the other hand, provides an appealing alternative to Palantir's high valuation with its stock trading at 7.7 times next year's analyst estimates. Salesforce's Agentforce solution aims to become the market leader in agentic AI, which can autonomously perform tasks with minimal human intervention. With potential usage-based pricing starting at $2 per conversation, Salesforce presents a cheaper valuation and an exciting AI opportunity for investors.
