Should You Forget Palantir and Buy 2 Artificial Intelligence (AI) Stocks Right Now?

Amid Palantir Technologies' elevated valuation, with a trailing P/E of 623, the article highlights two alternative AI investment opportunities. Advanced Micro Devices (AMD) is gaining significant traction in the AI chip market, evidenced by a deal with OpenAI for its Instinct MI450 GPUs and a warrant for a potential 10% equity stake, which analysts view as a major validation, alongside a more attractive forward P/E of 28.5. Concurrently, CoreWeave, an AI cloud computing provider, demonstrates robust growth with $22.4 billion in OpenAI deals, Microsoft as a key client, and a $30.1 billion revenue backlog, presenting a compelling, high-growth profile with a forward P/S of 13.

Analysis

Palantir Technologies (PLTR) has demonstrated significant historical growth, with a 2,130% gain over three years, yet its current valuation metrics are exceptionally high, featuring a trailing P/E of 623 and a forward P/E of 217. This premium valuation, despite a strong growth narrative, suggests potential overextension in market pricing, prompting a search for alternatives.

Advanced Micro Devices (AMD) is emerging as a validated AI chip player, evidenced by a significant deal with OpenAI for its Instinct MI450 GPUs and a warrant allowing OpenAI to acquire up to a 10% equity stake. Wedbush analyst Dan Ives characterized this as a "huge vote of confidence," significantly boosting AMD's standing in the AI chip spending cycle. AMD's stock has surged 90% year-to-date, outperforming Nvidia, and presents a more attractive valuation with a forward P/E of 28.5.

CoreWeave (CRWV) showcases robust growth in AI cloud computing infrastructure, driven by substantial partnerships including $22.4 billion in deals with OpenAI and Microsoft accounting for 62% of its 2024 revenue. The company reported Q2 revenue of $1.21 billion, up significantly year-over-year, and boasts a $30.1 billion revenue backlog, an 86% increase. Despite not yet being profitable, its forward price-to-sales ratio of 13 is considerably lower than Palantir's, indicating a compelling growth alternative.

Key Decisions for Investors

• Investors holding Palantir (PLTR) should re-evaluate their position given its extremely high valuation metrics (P/E 623, P/S 137) against its future growth prospects.
• Consider Advanced Micro Devices (AMD) as a validated AI chip play, benefiting from a significant OpenAI partnership and a more attractive forward P/E of 28.5 compared to high-multiple peers.
• Evaluate CoreWeave (CRWV) for exposure to high-growth AI cloud infrastructure, noting its substantial revenue backlog, key partnerships with OpenAI and Microsoft, and a more palatable forward P/S of 13.
• Diversify AI portfolio exposure by considering critical hardware and infrastructure providers like AMD and CoreWeave, which offer strong fundamental growth and strategic partnerships.