Semiconductor giant Nvidia (NVDA -0.85%) and artificial intelligence (AI) kingpin Palantir Technologies (PLTR -2.14%) are two of the most compelling technology stocks in the market. Nvidia harnessed demand for its graphics processing units (GPUs) to become the biggest company in the world, with a $4.4 trillion market capitalization. Palantir, meanwhile, is using its artificial intelligence platform to fundamentally change how governments and commercial businesses operate. The stock is up more than 500% in the last year and is the best-performing stock in the S&P 500.

In my view, you can’t go wrong with either of these tech stocks. But in a one-on-one matchup, which comes out on top?

Let’s look at both companies before rendering a verdict.

Nvidia

Nvidia’s GPUs are the engine behind this mammoth company. While they used to be best known for providing the graphics in computers, now GPUs are commonly used by companies that are building massive data centers to run artificial intelligence-powered platforms, including large language models needed for generative AI.

Nvidia has the lion’s share of this business, with Jon Peddie Research estimating that it has roughly 92% of the market share. And as Nvidia is expecting spending on data centers to accelerate from $250 billion in 2023 to $1 trillion annually by 2028, there’s a massive opportunity at hand.

In addition, major tech companies like Microsoft, Alphabet, and Meta Platforms are spending heavily and are even increasing their capital expenditure spending on their data centers. That’s why I’m expecting a solid earnings report from Nvidia when it reports its earnings for the current quarter, and why I’m expecting the stock to pop yet again after the numbers are released.

Palantir Technologies

Palantir got its start a little more than 20 years ago as a data mining company to provide real-time analytics and insights. As a government contractor, it’s long been valued by the military for its analytic technology that helps commanders make real-time decisions in battle. To the public eye, Palantir largely flew under the radar for years until in 2011, when it was credited for helping U.S. forces find and eliminate Sept. 11 mastermind Osama bin Laden.

Palantir works by drawing information from many sources, such as satellite imagery. By sifting through and digesting that information, it can perform instantaneous analysis that can help governments function. According to its CEO, Alex Karp, “Palantir was founded on the belief that the United States, its allies, and partners should harness the most advanced technical capabilities for their defense and prosperity.” 

As its capabilities expanded through the launch of its generative AI-powered Artificial Intelligence Platform (AIP), Palantir is quickly bringing in additional non-military government contracts. It has new contracts with the Federal Aviation Administration, the Centers for Disease Control and Prevention, the State Department, and the Internal Revenue Service. In the company’s just-released second quarter earnings report, U.S. government revenue increased 53% in the last year, reaching $426 million.

Commercial revenue is growing even faster, up 93% in the second quarter on a year-over-year basis and reaching $306 million. Clients include Walgreens Boots Alliance, AT&T, General Mills, United Airlines, and others, and Palantir is doing everything from making manufacturing more efficient to managing supply chains and helping companies scale.

Palantir closed 157 deals in the second quarter valued at more than $1 million, with 66 of them more than $5 million and 42 of them at least $10 million. As more companies bring Palantir’s platform online and share how they are improving their businesses, Palantir’s platform will become a must-have for many institutions.

The verdict

I’m not gonna lie. This is a tough one. I love both of these companies, and I think both are destined to increase.

But if I have to choose one, then the valuations of both companies will break the tie. At the time of this writing, Nvidia is richly valued both in its price-to-earnings (P/E) ratio of 59 and its forward P/E of 42, but Palantir comes in at an unhealthy 623 and 288, respectively.

The price-to-sales ratio, which compares market capitalization to revenue, is arguably an even more accurate measurement as both of these companies are pouring profits back into the business. And Nvidia is by far the strongest there, too.

PLTR PS Ratio data by YCharts

So, my winner in this hypothetical battle is Nvidia by a nose. But both stocks are great ones to have, and they’ll both anchor my portfolio for the foreseeable future.

Patrick Sanders has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Dr. Alex Karp isn’t your typical corporate executive. He doesn’t hold an MBA, and his public remarks often come in the form of unscripted, philosophical musings. Yet as CEO of data analytics powerhouse Palantir Technologies (PLTR -2.14%), Karp has led the company’s transformation from a secretive government contractor into a leading force in artificial intelligence (AI) adoption across the enterprise software landscape.

What many investors once viewed as a niche corridor, the intersection of defense operations and AI has swiftly become fertile ground supporting Palantir’s generational run. The company has secured some of the Department of Defense’s (DOD) most complex, mission-critical contracts, worth billions of dollars, cementing its role as a trusted partner in national security.

Following Palantir’s monster Q2 earnings report earlier this month, Karp’s confidence was on full display. During an interview on financial news program CNBC, he delivered a blunt message to Palantir’s rivals: “read ’em and weep.”

Let’s unpack what Karp really meant and assess why investors in competing platforms such as BigBear.ai (BBAI 5.39%) can no longer afford to ignore Palantir’s commanding lead in the AI defense arena.

Palantir is setting the pace to become the AI backbone for military operations

During the second quarter, Palantir’s revenue surged 48% year over year to $1.0 billion. While that growth is impressive on its own, the finer details reveal just how deeply Palantir has embedded itself in the military operations pocket of the AI landscape.

The company’s government segment grew 49% year over year, slightly outpacing overall growth. Drilling down further, Palantir’s U.S. government revenue rose by an even stronger 53% — reaching $426 million in the quarter. This momentum is supported by a string of high-profile Pentagon deals.

In March, Palantir partnered with defense contractors Northrop Grumman and L3Harris Technologies, along with autonomous systems specialist Anduril, in a $178 million U.S. Army deal to help build the Tactical Intelligence Targeting Access Node (TITAN) ground transportation system.

Just months later, the Army extended its relationship with Palantir, awarding a $795 million extension to continue using the company’s Maven Smart System(MSS) platform — bringing the total deal value above $1.2 billion.

More recently, Palantir further strengthened its public sector footprint with two additional contracts: a multiyear contract with the Army worth up to $10 billion, as well as a separate award to help develop a surveillance system for Immigration and Customs Enforcement (ICE).

Why is this important for BigBear.ai investors?

During BigBear.ai’s second-quarter earnings call, CEO Kevin McAleenan acknowledged that the company has “seen disruptions in federal contracts from efficiency efforts this quarter, most notably in programs that support the U.S. Army, as they seek to consolidate and modernize their data architecture.”

Given the details outlined above, there’s a strong possibility that the “disruptions” McAleenan referenced reflect Palantir winning these contracts. While BigBear.ai operates in some of the same broad fields as Palantir, such as AI analytics and machine learning, I think the comparison between the two companies is increasingly lopsided.

Each new government contract awarded to Palantir deepens its competitive moat. The company’s Foundry and Gotham platforms are evolving into a comprehensive, integrated ecosystem for the public sector — supporting a range of mission-critical needs.

Rather than true “network effects,” Palantir is enjoying a cumulative competitive edge that’s compounding with each deployment of its software — ultimately broadening the company’s footprint, strengthening its relationships, and making the cost of switching to competing platforms more costly.

These dynamics have effectively given Palantir a mini-monopoly on certain pockets of public sector deal flow, beyond the capacities of traditional defense contractors specializing in manufacturing hardware or equipment.

Is BigBear.ai stock a buy?

Karp’s soundbite wasn’t just swagger, nor was it merely aimed at short-sellers who have been betting against Palantir for years. It was a direct shot at every competing platform.

The 2025 stock chart reflecting Palantir and BigBear.ai tells a very different story.

BBAI data by YCharts

Palantir has built steady momentum on the back of rising deal flow, translating directly into accelerating revenue and profitability. BigBear.ai, by contrast, has seen far more volatile price swings, with its moves often driven by hype and the hopeful narrative that it could one day become the “next Palantir.”

That outcome appears increasingly improbable. Each new government contract Palantir secures widens the gap between it and smaller rivals struggling to keep pace.

For investors seeking exposure to AI’s role in military operations, Palantir offers a proven track record over speculative counterparts such as BigBear.ai, whose traction remains more aspirational than tangible.

If you bought $10,000 of Palantir (PLTR -2.14%) stock in 2020 when shares first hit the public market, you’d have close to $187,000 as of this writing. That kind of money can create a solid foundation toward building a $1 million portfolio. Even if Palantir stock merely meets the average return of the S&P 500, keeping those shares for another 15 to 20 years could result in a shareholder reaching millionaire status.

But a lot of people missed the boat on Palantir. The company’s stock has zoomed higher since late 2022, as generative artificial intelligence (AI) has helped expand its capabilities and support profitable revenue growth. And if you’re just looking to invest in Palantir shares today, you may be wondering if you missed the chance to become a millionaire on the back of a relatively small $10,000 investment in one of the hottest tech companies in the world.

Looking into Palantir

Palantir’s software collects disparate data sets from an organization and external sources, cleans them, identifies connections, and provides valuable insights that aid decision-makers in their role. While cloud computing providers might offer their own analytics tools, Palantir’s machine learning algorithms have proven extremely valuable, especially for customers with data spread across various sources.

In 2023, Palantir launched its Artificial Intelligence Platform (AIP), which allows an organization to use a large language model to interact with its software using natural language. That has significantly lowered the technical expertise required to get the most out of Palantir while expanding its use cases.

The financial results since that launch have been spectacular. Palantir just reported its eighth straight quarter of accelerating revenue growth, and management’s outlook for the third quarter suggests a ninth is in the making. In that time, Palantir has become profitable, enjoying very strong operating leverage. Its adjusted operating margin climbed to 46% last quarter, up from 37% last year and 25% two years ago.

CEO Alex Karp boasts that this kind of growth is unprecedented for a company with the scale of Palantir. The company surpassed $1 billion in revenue last quarter, and its so-called Rule of 40 score (revenue growth plus operating margin) came in at 94, blowing away the gold standard for investing in software companies.

While the profitable revenue growth is extremely impressive, there’s reason to doubt that Palantir’s stock can continue to produce the same level of returns as it has over the last three years. It’ll be hard for it to even come close.

Can $10,000 invested today turn into $1 million?

Turning $10,000 into $1 million requires an investment to increase 100-fold. To put that in perspective, Palantir currently has a market cap of $445 billion as of this writing. To increase 100-fold would put its market cap at $44.5 trillion. The largest company in the world right now has a market cap one-tenth that size. So, that’s a big hurdle in and of itself.

The more pressing issue, however, is the current valuation investors put on Palantir’s stock. Shares currently trade for more than 100 times revenue expectations over the next 12 months. That’s not just a high multiple, it’s stratospheric. Other AI stocks can be had for multiples below 20-times sales. That said, few are growing like Palantir with its profitability and at its scale. Still, such a premium price is hard to justify.

Even if Palantir grows revenue at an average rate of 50% through the end of 2030, its current price would still be about 14 times sales (five and a half years down the line). Only a handful of AI software stocks command a multiple like that for their 2026 revenue expectations.

Palantir should see its price-to-sales multiple shrink over the next five years. Revenue won’t accelerate forever, but many investors are acting like it should. Wall Street is decidedly bearish on the stock, but retail ownership (above 40%) continues to support the rising stock price. That makes Palantir extremely susceptible to an earnings miss or a shift in investor sentiment.

Investors looking at the stock today may want to wait for a significant pullback in price before adding shares to their portfolio. It’s unlikely that a $10,000 investment in Palantir today will make you a millionaire.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Palantir Technologies was the top-performing stock in the S&P 500 and Nasdaq-100 during the first half of 2025. With shares soaring by 80% through the first six months of the year — and by 427% over the last 12 months — Palantir has helped drive a lot of attention to the intersection of artificial intelligence (AI) and defense contracting.

Palantir is far from the only company seeking to disrupt defense tech. A little-known competitor to the company is BigBear.ai (BBAI -3.35%), whose shares are up by an impressive 357% over the last year.

Could BigBear.ai emerge as the next Palantir? Read on to find out.

BigBear.ai is an exciting company in the world of defense tech, but…

BigBear.ai’s share price volatility so far this year mimics the movements of a rollercoaster. Initially, shares rose considerably shortly following President Donald Trump’s inauguration and the subsequent announcement of Project Stargate — an infrastructure initiative that aims to invest $500 billion into AI projects through 2029.

BBAI data by YCharts

However, these early gains retreated following the Pentagon’s plans to reduce its budget by 8% annually.

While reduced spending from the Department of Defense (DOD) was initially seen as a major blow to contractors such as Palantir and BigBear.ai, the trends illustrated above suggest that shares rebounded sharply — implying that the sell-offs back in February may have been overblown. Why is that?

In my eyes, a major contributor to the recovery in defense stocks came after Defense Secretary Pete Hegseth announced his intentions to double down on a strategy dubbed the Software Acquisition Pathway (SWP).

In reality, the DOD’s budget cuts are focused on areas that are deemed non-essential or inefficient. For example, the Pentagon freed up billions in capital by reducing spend with consulting firms such as Booz Allen Hamilton, Accenture, and Deloitte. In addition, a contract revolving around an HR software system managed by Oracle was also cut.

Under the SWP, it appears that the DOD is actually looking to free up capital in order to double down on more tech-focused initiatives and identify vendors that can actually handle the Pentagon’s sophisticated workflows.

With so much opportunity up for grabs, it’s likely that optimistic investors saw this as a tailwind for BigBear.ai. This logic isn’t too far off base, either.

BigBear.ai’s CEO is Kevin McAleenan, a former government official with close ties to the Trump administration. McAleenan’s strategic relationships within the government combined with the DOD’s focus on working with leading software services providers likely has some investors buying into the idea that BigBear.ai won’t be flying under the radar much longer.

…how does the company really stack up beside Palantir?

The graph below breaks down revenue, gross margin, and net income for BigBear.ai over the last year. With just $160 million in sales, the company tends to generate inconsistent gross margins — which top out at less than 30%. Moreover, with a fairly small sales base and unimpressive margin profile, it’s not surprising to see BigBear.ai’s losses continue to mount.

BBAI Revenue (TTM) data by YCharts

By comparison, Palantir generated $487 million in government revenue during the first quarter of 2025. In other words, Palantir’s government operation generates nearly triple the amount of revenue in a single quarter that BigBear.ai does in an entire year. On top of that, Palantir’s gross margins hover around 80%, while the company’s net income over the last 12 months was over $570 million.

Is BigBear.ai stock a buy right now?

Right now, BigBear.ai trades at a price-to-sales (P/S) ratio of around 11. While this may look “cheap” compared to Palantir’s P/S multiple of 120, there is a reason for the valuation disparity between the two AI defense contractors.

Palantir boasts large, fast-growing public and private sector businesses that command strong profit margins. By contrast, BigBear.ai is going to have a difficult time scaling so long as it keeps burning through heaps of cash.

Not only would I pass on BigBear.ai stock, but I also do not see the company becoming the next Palantir. Palantir is in a league of its own in the defense tech space, and I do not see BigBear.ai as a formidable challenger.

Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Abbott Laboratories, Accenture Plc, Oracle, and Palantir Technologies. The Motley Fool has a disclosure policy.

More than 30 years ago, the advent of the internet began captivating the attention of everyday investors. Over these three-plus decades, investors have often had a next-big-thing trend to chase after. At the moment, nothing is garnering more attention than the evolution of artificial intelligence (AI).

When most investors think about AI, semiconductor titan Nvidia probably comes to mind — and for good reason. Nvidia’s graphics processing units (GPUs) have become staples in high-compute data centers. Its Hopper and successor Blackwell GPUs are powering split-second decision-making, generative AI solutions, and the training of large language models, such as chatbots and virtual agents.

But the argument can be made that Nvidia’s time atop the AI pedestal is over, with AI-driven data-mining specialist Palantir Technologies (PLTR 1.62%) dethroning it. Palantir stock has gained nearly 2,000% since 2023 began, and its market cap has grown to $317 billion, as of the closing bell on July 3. It went from a company tech investors somewhat followed to being one of the most-influential tech businesses in the world.

Palantir’s success has been fueled by the irreplaceability of the services it offers. Its Gotham platform aids federal governments with data gathering and analysis, as well as military mission planning and execution. Meanwhile, Foundry is relied on by businesses to make sense of their data and streamline their operations. With no one-for-one large-scale replacements for Palantir’s AI- and cloud-based software-as-a-service (SaaS) model, its operating cash flow is highly predictable and secure.

Furthermore, Palantir made the turn to recurring profitability well ahead of Wall Street’s consensus expectation. Maintaining a rapidly growing moat and validating its competitive edge with recurring profits is a quick way to win over Wall Street and investors.

But what if Palantir’s momentous run-up is nothing more than a short-lived FOMO (fear of missing out) event? While this opinion will undoubtedly be unpopular given the riches this company has bestowed on shareholders since 2023 began, there are seven valid reasons to believe Palantir stock can plunge 60%, if not more.

1. Next-big-thing technologies always endure bubbles

One of the biggest challenges for Palantir Technologies is that investors have a terrible habit of overestimating how quickly a game-changing innovation will gain utility and be adopted by businesses and/or consumers.

Including the internet, every next-big-thing technology for more than three decades has endured a bubble-bursting event. This is to say that every innovation has needed time to mature. With most businesses not generating a positive return on their AI investments, nor optimizing their deployed AI solutions, it’s a fair assumption that AI is walking down the same path as prior game-changing technologies.

While the multiyear government contracts (via Gotham) and subscriptions (via Foundry) Palantir has earned should keep its sales from plunging if the AI bubble bursts, it’ll do nothing to save the company’s stock from a wave of negative investor sentiment.

2. Gotham’s ceiling is lower than investors realize

To date, Gotham has been the operating platform responsible for driving Palantir’s profits and its annual growth rate that typically range between 25% and 35%. Having the U.S. government in its corner has undeniably been a positive.

However, Gotham’s client pool is rather limited. Since it provides data collection and military mission planning/execution, Palantir’s flagship SaaS model isn’t available to China, Russia, and a laundry list of other countries that aren’t bona fide allies of the U.S. This significantly lowers Gotham’s long-term ceiling more than investors probably realize.

3. The Trump administration’s focus on government efficiency is worrisome

For defense-oriented businesses, there’s usually no better scenario that a unified Republican government. Historically, the GOP has favored aggressive defense spending, which plays right into the hands of Palantir’s Gotham platform. President Donald Trump has previously noted the need to keep domestic AI innovations protected.

But Trump’s campaign promise has also been to make Washington, D.C., more efficient. Though the president has been supportive of defense companies in the past, there’s little guarantee that the Trump administration won’t aim to reduce federal spending in the future. There’s also little visibility of what defense spending might entail beyond Trump’s four years in office.

4. Palantir’s earnings quality is poor

A public company that’s added more than $300 billion in market cap over the last 30 months should be absolutely crushing it from a fundamental standpoint. With Palantir shifting to recurring profitability, the expectation is that rapid sales growth in Gotham and Foundry is powering its net income higher. Yet this isn’t the complete story.

Last year, 40% of Palantir’s $489.2 million in pre-tax income was traced back to interest income on its cash. During the first three months of 2025, 23% of the company’s pre-tax income came from interest on its cash. While I’m not faulting Palantir or its management for generating interest income on the company’s cash pile, it’s important to recognize that a significant chunk of the company’s pre-tax income is coming from a non-innovative and unsustainable source.

PLTR Shares Outstanding data by YCharts.

5. Share-based compensation is working against investors

Another reason for investors to pass on Palantir stock is the company’s persistent share-based compensation.

Stock-based compensation often serves a purpose. Handing out vested shares, stock options, and so on, encourages talented individuals to stay with a company. Stock-based compensation can also be used as something of a dangling carrot to encourage workers and managers to meet specific growth targets.

Unfortunately, stock-based compensation can have a deleterious impact for shareholders. In the case of Palantir, steadily climbing share-based compensation is increasing its outstanding share count and having a dilutive effect on existing shareholders. While this dilutive effect has, thus far, been masked by AI euphoria and FOMO, history suggests this is highly unlikely to continue for an extended period.

6. Insiders have been persistent sellers for nearly five years

Investors would also be wise to take note of the persistent insider selling activity of Palantir Technologies’ stock since its initial public offering (IPO) in September 2020.

Once again, there’s a bit of a caveat to this data. Namely, the compensation of executives is often heavily weighted toward shares and stock options, which requires the sale of shares to cover their federal and/or state tax liability. In other words, not all insider selling is necessarily bad news or indicative of management losing faith in their company.

With the above being said, more than $7.4 billion in Palantir stock has been sold since the September 2020 IPO, with former Chief Accounting Officer Heather Planishek’s 10,000-share buy in May 2025 being the only executive or director purchase in 57 months.

If executives and directors won’t buy shares of Palantir, why should you?

PLTR PS Ratio data by YCharts. PS Ratio = price-to-sales ratio.

7. Palantir’s valuation is an unsustainable eyesore

The final piece of the puzzle that explains why Palantir stock can plunge 60% (or more) is its valuation.

Over the last three decades, megacap stocks on the leading edge of next-big-thing trends have historically topped out at price-to-sales (P/S) ratios ranging from 30 to 43. Some of the brand-name companies that fit this definition include Microsoft, Amazon, Cisco Systems, and even Nvidia, based on its peak P/S ratio of 42 last summer.

Palantir stock ended the previous week at a trailing-12-month P/S ratio of more than 107! It’s effectively three times higher than other megacap companies before their respective bubbles burst.

Even if Wall Street’s consensus sales estimates prove accurate and Palantir’s revenue catapults by 263% to $10.42 billion from 2024 to 2028, its current valuation (assuming no share-based compensation) would place it at a lofty P/S ratio of 30 by the end of 2028. This is a historically unsustainable valuation, and it’s just a matter of time before Wall Street and investors come to this realization.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Throughout 2025, technology stocks have been whipsawed by the latest news or rumors surrounding the economy, interest rates, and tariffs. One stock that has demonstrated a degree of immunity to these dynamics is data mining darling Palantir Technologies (PLTR -2.06%). With shares up 82% on the year, Palantir is the top-performing stock in the S&P 500 index so far this year.

While this level of momentum may cause trepidation among cautious investors, more bullish analysts, such as Dan Ives, see the rise of Palantir as an unstoppable force. In fact, Ives thinks Palantir is on its way to joining the trillion-dollar club before the end of the decade.

Personally, I am in a different camp. Right now, Palantir is trading at valuation multiples that are far higher than those investors witnessed in the late 1990s during the dot-com bubble. In short, I think a large-scale valuation normalization is in store for Palantir.

By contrast, emerging infrastructure services provider CoreWeave (CRWV 8.02%) looks well-positioned to dominate the next chapter of the artificial intelligence (AI) narrative.

Let’s explore Palantir’s rise and why I think the stock is due for a pullback. From there, I’ll dig into CoreWeave’s underlying business and explain how I think the company could eclipse Palantir’s size over the next five years.

Palantir versus CoreWeave: converging AI storylines

Palantir’s breakout moment occurred in April 2023 when the company released a new product called the Artificial Intelligence Platform (AIP). Palantir markets AIP to both the private and public sectors — with the U.S. Military being one of Palantir’s key partners.

Unlike other data analytics platforms, AIP differentiates itself by helping large, complex businesses build ontologies. An ontology is a detailed visualization (i.e., a map) that illustrates various aspects of a business by breaking down revenue sources, cost structures, and other critical information in extreme detail. This process can help executive-level decision-makers model simulations using real-time data to assess the impact of different variables on the business.

As investors can see from the figures above, Palantir’s customer count is surging thanks to AIP’s popularity. The subtle takeaway from the graphs above is that AIP has helped Palantir branch out beyond its heavy reliance on public sector deals, as evidenced by the faster growth rate in commercial customer counts compared to overall customer growth at the company. Given these trends, I think it is reasonable to say that software has been top of mind for AI developers over the last couple of years.

Nevertheless, I believe CoreWeave’s long-term prospects are more robust compared to Palantir’s.

CoreWeave specializes in a cloud-based infrastructure through which it rents out access to Nvidia graphics processing unit (GPU) architectures to its customers. To help paint a picture of how strong demand for chip access is expected to become, consider that global management consulting firm McKinsey & Company forecasts $6.7 trillion spent on AI infrastructure by 2030. The majority of this spend is likely going to be allocated to hardware products (chips) for data centers.

In my eyes, augmenting software with more AI-centric capabilities is part of the first phase of broader investment in the technology. Hence, Palantir has been a major beneficiary.

But over the next several years, I think investing in AI infrastructure will become a greater focus for AI’s biggest spenders — namely, cloud hyperscaler developers such as Microsoft, Amazon, Alphabet, Oracle, Meta Platforms, OpenAI, and others. CoreWeave already works with many of these companies, and I expect rising infrastructure spend to serve as a bellwether for the company in the coming years.

What does Wall Street think?

The charts below illustrate Wall Street’s consensus revenue and earnings estimates for Palantir and CoreWeave over the next couple of years.

PLTR Revenue Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

Per the figures above, investors can see that CoreWeave is already on pace to generate more revenue than Palantir this year. And yet, Palantir currently boasts a market capitalization of $326 billion — nearly fourfold that of CoreWeave.

On top of that, analysts expect CoreWeave’s revenue to rise by more than threefold while transitioning to profitability within two years. By contrast, Palantir’s revenue and profits aren’t expected to even double during this same period.

While these estimates will likely change as both companies continue to form new strategic partnerships and release new products, I think, broadly speaking, the secular trends supporting the AI narrative lean more in favor of CoreWeave over the next five years. Nvidia is expected to continue releasing more GPU architectures, while cloud hyperscalers show no signs of slowing down AI capital expenditures (capex).

At some point, I think the reality of Palantir’s actual growth will catch up with the sober overzealous sentiment currently surrounding the company. Ultimately, I believe this will result in a sell-off by growth investors seeking more robust prospects.

Should you buy CoreWeave stock right now?

Although I am optimistic about CoreWeave’s long-term prospects, I think the stock is overbought right now. Following its initial public offering earlier this year, shares of CoreWeave are up by nearly 300%. For now, CoreWeave is exhibiting the behavior of a meme stock. I think the prudent strategy is to begin initiating a position at a more reasonable price point.

In terms of the big picture, though, CoreWeave’s long-term prospects look encouraging, and I believe the company’s valuation will steadily climb over the next five years at a steeper rate than Palantir’s.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Oracle, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Data mining specialist Palantir Technologies (PLTR -0.97%) picked up right where it left off in 2024. Last year, Palantir stock was the top performer in the S&P 500 index, as well as the third-best stock in the Nasdaq-100. So far in 2025, things haven’t changed much for the artificial intelligence (AI) software player — as shares have rocketed by an eye-popping 74% as of this writing (June 10).

While the momentum doesn’t appear to be slowing down at all for Palantir, my prediction is that the stock will plummet during the second half of the year.

Let’s explore some of the trends fueling Palantir stock right now, as well as some interesting breadcrumbs that could support my idea that shares are headed for a sell-off.

Should you dump your Palantir position right now? Read on to find out.

Palantir’s valuation is sky high, and…

There is a lot that can be gathered from the chart below. The obvious takeaway is that Palantir’s price-to-sales (P/S) multiple of 105 is significantly higher than any of the software growth stocks in this peer set. However, the bigger idea from the analysis below is that Palantir’s valuation continues to expand.

PLTR PS Ratio data by YCharts

These dynamics imply that investors are buying Palantir stock in droves. The deeper question I’ve been asking is: Who are the investors that keep chasing Palantir’s momentum?

Based on some recent clues, I think I might have an answer.

…smart investors are taking profits

Ark Invest CEO Cathie Wood is one of the original Palantir bulls on Wall Street. Shortly following the company’s IPO in late 2020, Wood appeared on financial news programs on a regular basis — constantly talking about her excitement around Palantir and the company’s ability to disrupt legacy software providers. While this was a great source of indirect PR for Palantir, Wood shocked the investment world when she dumped her stake sometime in 2022.

Following these moves, Wood started accumulating a position in Palantir stock once again in 2023. Per the graph in the prior section, Ark Invest’s position in Palantir is sitting on a healthy profit considering shares now hover around all-time highs. Wood has taken note of these trends, and the famous tech investor is once again reducing her exposure to Palantir.

Wood isn’t the only notable personality on Wall Street that’s choosing to take profits in Palantir, though. Billionaire investor Stanley Druckenmiller of the Duquesne Family Office completely exited Palantir during the first quarter, per the fund’s most recent 13F filing. Similar to Wood, Druckenmiller has also been in and out of Palantir stock in recent years.

I view the decision to reduce exposure to Palantir stock right now as a prudent one. While the selling from Wood and Druckenmiller does not necessarily imply a bearish view of Palantir at all, I think trimming exposure and taking profits in a stock that seems overbought makes sense.

My prediction is that more institutions will follow in the second half of 2025

Palantir’s valuation is historically high, even compared to what investors witnessed during the peak bubble days of the dot-com boom. I think a rising number of institutions will come to the opinion that Palantir’s current valuation trajectory is not sustainable given how far the stock has already run.

PLTR Shares Increased by Institutional Investors data by YCharts

The graph above illustrates the number of shares of Palantir stock that have increased and decreased by institutional investors over the last year.

As the trends indicate, there was pronounced institutional buying of Palantir stock during the last few months of 2024. At the same time, the orange line — which indicates institutional selling — also steadily climbed during late 2024 and ultimately converged with the purple line (buyers) at the start of 2025. Right now, shares bought by institutions remains higher than shares sold, which implies large investors are net buyers of Palantir stock for the time being.

Throughout this year, both buying and selling activity has decelerated — as indicated by the relative flattening of both lines. These trends suggest that while institutions remain cautiously optimistic about Palantir, there could be further selling on the horizon as the narrowing gap between buyers and sellers becomes more obvious.

As such, I think the current momentum fueling Palantir stock could tempt more institutions to dump their shares — leading to a plummeting share price and much-needed valuation normalization.

Ultimately, I don’t think dumping your position in Palantir is entirely necessary. As a long-term investor, it’s important to hold on to your highest-conviction winners. However, I do think taking some gains off the table could be a smart decision right now.

Adam Spatacco has positions in Palantir Technologies. The Motley Fool has positions in and recommends Cloudflare, CrowdStrike, Datadog, MongoDB, Palantir Technologies, ServiceNow, and Snowflake. The Motley Fool has a disclosure policy.

Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.