Billionaires Are Buying 2 Artificial Intelligence (AI) Stocks That Wall Street Analysts Say Can Soar Up to 240%

Hedge fund managers including Chris Rokos, Philippe Laffont, Ken Griffin, and Paul Tudor Jones increased their positions in Palantir (PLTR) and Upstart (UPST) during Q1, according to 13F filings. Analysts at Wedbush and Mizuho see significant upside for both stocks, with price targets implying potential gains of 240% for Palantir and 85% for Upstart, respectively; however, Upstart's stock recently declined due to investor concerns about the broader lending environment.

Analysis

Several prominent hedge fund managers, including Chris Rokos, Philippe Laffont, Ken Griffin, and Paul Tudor Jones, demonstrated significant interest in Palantir Technologies (PLTR) and Upstart (UPST) during the first quarter, initiating new positions or substantially increasing existing stakes, as per 13F filings. This institutional buying aligns with bullish analyst sentiment; Dan Ives at Wedbush Securities projects Palantir could reach a $1 trillion market capitalization within three years, implying 240% upside from its $294 billion valuation, while Dan Dolev at Mizuho Securities set an $85 price target for Upstart, suggesting 85% upside from its $46 share price. Palantir showcased strong Q1 performance, with its customer count increasing 39% to 769, average spend per existing customer rising 24%, revenue growing 39% to $884 million, and non-GAAP earnings per share jumping 62% to $0.13, largely attributed to demand for its new Artificial Intelligence Platform (AIP). Despite this growth and a projected 31% annual adjusted earnings increase through 2026, Palantir's current valuation at 270 times earnings presents a significant risk of correction. Upstart also delivered strong Q1 results, with loan originations more than doubling, revenue increasing 67% to $2.1 billion, and non-GAAP net income at $0.30 per diluted share, reversing a prior-year loss. However, Upstart's stock experienced a post-earnings decline, reflecting investor apprehension about the broader lending environment amid potential economic headwinds. Its valuation of 140 times earnings is underpinned by an anticipated 195% annual adjusted earnings growth through 2026 and the demonstrated superior performance of its AI-quantified loans, which have historically outperformed two-year Treasury yields by an average of 8 percentage points. The article suggests that while both companies exhibit high growth potential driven by AI, their lofty valuations and external economic factors warrant a cautious approach, aligning with the provided mixed sentiment signal.

Key Decisions for Investors

• Consider Palantir for its AI-driven growth and strong Q1 results, but be mindful of its extremely high valuation (270x earnings) and the potential for near-term volatility; patient investors might initiate a small position with the possibility of adding on significant price corrections.
• Evaluate Upstart as a potential long-term investment due to its AI-powered lending platform and impressive Q1 earnings beat, but acknowledge the recent stock decline reflects valid concerns about the lending environment; the 85% implied upside to $85 per share and strong loan performance offer a compelling case for patient capital despite current market anxieties.
• Monitor macroeconomic indicators, particularly those impacting credit markets for Upstart, and track the adoption rate and competitive landscape for Palantir's AI Platform, as these will be key drivers for future performance.
• Given the high P/E ratios for both entities, investors should be prepared for significant price swings and ensure such growth-oriented tech stocks align with their overall risk tolerance and investment horizon.