Nvidia (NVDA) and Palantir (PLTR) have been two of 2024’s hottest stocks — Nvidia’s 179.6% year-to-date gain has made it the second-most worthwhile company on the earth by market cap, while Palantir’s 153.3% gain has put it on the map as a mega-cap tech stock to be reckoned with, not to say a recent member of the S&P 500 (SPX).
Each stocks have benefitted from being key players within the AI revolution. Each corporations have exciting futures ahead of them, but there may be a key difference between the 2 that makes one the more compelling opportunity at this time limit. Which looks just like the better option for investors right away?
Massive Gap in Valuation on a Price-to-Earnings Basis
Nvidia’s 2024 surge has taken it to a comparatively high valuation multiple of 47.5 times January 2025 earnings estimates. The S&P 500 trades at 24.7 times earnings, meaning that Nvidia is sort of twice as expensive because the broader market.
Nevertheless, with consensus earnings per share projected to grow to $4.01 per share for the fiscal yr ending in January 2026, Nvidia looks quite a bit more palatable at 33.6 times forward earnings. While this remains to be fairly expensive, it’s beginning to look reasonable enough for a mega-cap powerhouse projected to grow earnings per share by over 40% for the yr. While Nvidia sometimes catches flack from value-oriented investors for its above-average price-to-earnings multiple, Palantir is even costlier.
The large 153% YTD gain has pushed shares of Palantir to an incredible valuation of 122.4 times December 2024 earnings estimates. That is greater than double Nvidia’s valuation and roughly five times the broader market. With the stock expected to grow earnings per share by 19.4% to $0.43 per share for December 2025, the stock’s valuation comes down a bit but remains to be trading at an exorbitant triple-digit multiple of 100.8 times forward earnings.
Looking Beyond Price-to-Earnings
Plus, it’s not only price-to-earnings that makes Palantir look significantly costlier than Nvidia. When the 2 stocks on a price-to-sales basis, a preferred metric often used for evaluating high-growth names like technology stocks and software stocks, Palantir trades at an astronomical price-to-sales ratio of 35.3, while Nvidia trades for a high but comparatively cheaper 26.3 times sales.
What In regards to the PEG Ratio?
Lastly, it’s value comparing the 2 stocks based on their PEG ratios (price-to-earnings-to-growth ratio), a preferred valuation metric useful for evaluating growth stocks like Nvidia and Palantir by accounting for earnings growth. PEG ratio is calculated by taking a stock’s price-to-earnings ratio and dividing it by its earnings growth rate. The lower the PEG ratio, the higher a stock looks by this measure. Investors and analysts who utilize this metric typically view a PEG ratio of 1.0x or less to be undervalued.
So, how do Nvidia and Palantir stack up on this basis? Nvidia’s PEG ratio of 1.8 is a bit higher than ideal but not prohibitive. Then again, Palantir trades at a significantly higher PEG ratio of 10.4, indicating that it is probably going overvalued even when accounting for its earnings growth.
Palantir is little question an exciting company, nevertheless it’s hard to sustain a valuation multiple like this, and it leaves little room for error — if the corporate falls wanting analyst expectations or hits any speed bumps, shares could tumble quickly.
Is NVDA Stock a Buy, In line with Analysts?
Turning to Wall Street, NVDA earns a Strong Buy consensus rating based on 39 Buys, three Holds, and nil Sells assigned prior to now three months. The average NVDA stock price goal of $152.86 implies 10.7% upside potential from current levels.
See more NVDA analyst rankings
Is PLTR Stock a Buy, In line with Analysts?
Turning to Wall Street, PLTR earns a Hold consensus rating based on 4 Buys, six Holds, and 6 Sell rankings assigned prior to now three months. The average PLTR stock price goal of $27.67 implies 36.2% downside potential from current levels.
See more PLTR analyst rankings
Smarten Up
Wall Street analysts are way more constructive on Nvidia, and so is TipRanks’ proprietary Smart Rating system. The Smart Rating is a quantitative stock scoring system created by TipRanks. It gives stocks a rating from one to 10, based on eight key market aspects. Scores of eight, nine, or 10 are considered akin to an Outperform rating. Scores of 4, five, six, or seven are considered Neutral, and scores of three or below are considered akin to an Underperform rating.
Nvidia boasts an Outperform-equivalent Smart Rating of 9.
Meanwhile, Palantir receives a far less favorable Neutral Smart Rating of 4.
Nvidia Is the Clear Alternative
NVDA and PLTR are each high-flying AI stocks, and each are projected to grow earnings significantly within the yr ahead. Nevertheless, Nvidia is projected to grow earnings greater than twice as much as Palantir. Despite this, Nvidia shares trade for a far cheaper valuation multiple. Nvidia is usually criticized as an ‘expensive’ stock, but its forward earnings multiple is just a 3rd of Palantir’s double-digit valuation, making it look downright low cost compared.
Plus, sell-side analysts rate Nvidia a Strong Buy and see an upside of 10.7% over the following 12 months, while they’re considerably more cautious towards Palantir, rating it a Hold and forecasting a possible downside of 36.4% from current levels. This disparity in analyst views is one other specialty in favor of Nvidia.
I’m bullish on Nvidia based on its significantly cheaper valuation and superior earnings growth, making it the clear-cut winner on this comparison of high-profile AI stocks. For investors trying to capitalize on the generative AI wave, Nvidia continues to appear like a wise selection.