Better Artificial Intelligence Stock: Palantir vs. Advanced Micro Devices

The article contrasts Palantir Technologies (PLTR) and Advanced Micro Devices (AMD) as AI investment plays, noting Palantir's strong Q2 revenue growth (up 48% YoY, commercial up 93%) driven by its AIP, but raising concerns about its elevated valuation (forward P/E 217). AMD, however, is highlighted for its recent significant deal to supply GPUs to OpenAI, contributing to a 229% surge in Q2 net income and presenting a more attractive forward valuation (P/E 28.5), positioning it as a preferred AI stock.

Analysis

Palantir Technologies (PLTR) demonstrated robust operational growth in Q2, with revenue exceeding $1 billion for the first time, marking a 48% year-over-year increase. This performance was significantly driven by its Artificial Intelligence Platform (AIP), which propelled commercial contracts to grow 93% year-over-year to $306 million, alongside a 53% increase in U.S. government revenue to $426 million. The company closed 157 deals valued at least $1 million during the quarter.

Despite strong revenue expansion, Palantir faces considerable valuation scrutiny, trading at a forward P/E of 217 and a P/S ratio of 137, which the article deems unsustainable. In contrast, Advanced Micro Devices (AMD) has solidified its position in the AI sector through a substantial deal with OpenAI, agreeing to supply up to 6 gigawatts of GPU compute capacity. This partnership also grants OpenAI warrants for a 10% stake in AMD.

AMD's Q2 financial results reflect this momentum, with revenue increasing 32% to $7.68 billion and net income surging 229% to $872 million. The company's stock has climbed 97% year-to-date, largely post-OpenAI announcement, and presents a more attractive valuation profile with a forward P/E of 28.5 and a P/S ratio of 9.3. While Palantir's upcoming Q3 earnings report on November 3rd will be a critical determinant of its sustained momentum, AMD appears to offer a more fundamentally sound investment thesis within the AI landscape.

Key Decisions for Investors

• Investors should closely monitor Palantir's Q3 earnings report on November 3rd for continued AIP-driven revenue growth, as any deceleration could trigger profit-taking given its elevated valuation metrics.
• Consider AMD as a potentially more stable AI investment due to its strategic OpenAI partnership, strong Q2 financial performance, and more reasonable forward valuation compared to Palantir.
• Evaluate the long-term implications of AMD's deal with OpenAI, particularly the potential for future revenue multiplication and the strategic value of OpenAI's equity stake in the company.