Palantir Technologies(NASDAQ:PLTR) shares are up 285% this year, while Nvidia(NASDAQ: NVDA) shares are up 175%. Both companies play important roles in the fast-growing artificial intelligence (AI) economy, but several billionaire fund managers sold some of their shares in Palantir and bought more shares of Nvidia in the third quarter.
Cliff Asness of AQR Capital Management sold 99,140 shares of Palantir, reducing his position by 16%. Meanwhile, he added 719,710 shares of Nvidia, increasing his position by 5%. Nvidia is now the largest position in AQR’s portfolio.
Citadel’s Ken Griffin sold 5.1 million shares of Palantir, reducing his stake by 91%. Meanwhile, he bought 4.7 million shares of Nvidia, increasing his stake by 194%. Nvidia is the second-largest position in Citadel’s portfolio, excluding options contracts and index funds.
Steven Schonfeld of Schonfeld Strategic Advisors sold 60,384 shares of Palantir, completely closing his position in it. Meanwhile, he added 703,192 shares of Nvidia, increasing his stake by 217%. Nvidia is the largest holding in Schonfeld’s portfolio, excluding index funds.
Palantir provides data analysis software. Gotham and Foundry’s core platforms integrate information and machine learning (ML) models into an ontology: a digital layer that defines the relationships between real-world objects. Using off-the-shelf and custom analytics tools, companies can query the ontology layer to surface insights that improve decision-making.
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Palantir also has an artificial intelligence platform called AIP, which provides generative AI support to its core products, allowing users to interact with that software using natural language. For example, procurement teams that manage supply chains with Foundry can simply ask the platform to assess issues and propose solutions as they arise.
While many vendors sell AI and analytics tools, Palantir believes it is unique in its ability to operationalize AI. In other words, Palantir says its software allows customers to bring prototype use cases to production more effectively than with other solutions. There may be some presumption in that belief, but analysts have recognized Palantir as a leader in AI/ML platforms.
Palantir reported excellent financial results in the third quarter, exceeding expectations on the top and bottom lines. Revenue rose 30% to $725 million, and non-GAAP net income rose 43% to $0.10 per diluted share. Management attributed its strong performance to momentum with AIP.
“Our undisputed ability to seamlessly integrate AI demand with essential data, distribution and decision-making structures is what truly sets us apart,” CEO Alex Karp wrote in his letter to shareholders. That confidence is undoubtedly encouraging for Palantir shareholders, but the company’s valuation has become a significant problem.
Wall Street expects Palantir to grow its adjusted profits 27% annually through 2025. That makes the current valuation of 188 times earnings absurdly expensive. These numbers give it a price-to-earnings-growth ratio (PEG) of 7, and conventional wisdom says that anything trading with a PEG above 2 is expensive. Prospective investors should avoid this stock for now, and current shareholders should consider unwinding large positions.
Dan Ives of Wedbush Securities says Nvidia is the “foundation of the AI revolution.” The company designs the most coveted graphics processing units (GPUs) in the computer industry. Nvidia accounted for 98% of GPU shipments in data centers over the past two years and has about an 80% market share in AI accelerator chips. That leadership is reinforced by CUDA, a robust ecosystem of software development tools.
An article in The Wall Street Journal recently explained how CUDA contributed to Nvidia’s rise: “Year after year, Nvidia responded to the needs of software developers by pumping out specialized code libraries, allowing a huge range of tasks to run on its GPUs at speeds impossible with conventional, general-purpose processors such as those made by Intel And AMD,” wrote Christopher Mims of that newspaper.
Nvidia reported excellent financial results in the third quarter, exceeding expectations on the top and bottom lines. Revenue rose 94% to $35 billion, and non-GAAP net income rose 103% to $0.81 per diluted share. Investors have good reason to think the momentum will continue. Nvidia is currently ramping up production of its next-generation Blackwell GPUs, and CFO Colette Kress recently told analysts, “Demand is huge.”
Looking ahead, Wall Street expects Nvidia’s adjusted earnings to rise 52% year-over-year through fiscal 2026, which ends in January 2026. That consensus makes the current valuation of 52 times adjusted earnings seem quite reasonable. Those numbers give a PEG ratio of 1, which makes Nvidia much cheaper than Palantir. Patient investors should easily buy a position in this stock today.
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Trevor Jennewine holds positions at Nvidia and Palantir Technologies. The Motley Fool holds positions in and recommends Advanced Micro Devices, Intel, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: Short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
Palantir Stock vs. Nvidia Stock: Billionaires Buy One and Sell the Other was originally published by The Motley Fool
