Analysts at Forrester research recently recognized Palantir Technologies (NYSE:PLTR) And Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) as market leaders in artificial intelligence (AI) and machine learning platforms, a collection of tools that support model training and application development.
However, billionaire Ken Griffin of Citadel, the most profitable hedge fund in history as measured by net profit since inception, sold Palantir stock and bought Alphabet stock in the third quarter, as detailed below:
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Sold 5.1 million shares of Palantir, reducing Citadel’s position by 91%
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Bought 244,835 shares of Alphabet, increasing Citadel’s stake by 20%.
Here’s what investors need to know about these leading AI companies.
Palantir specializes in data analytics, but the company has become a major player in the artificial intelligence (AI) platform market thanks to its Artificial Intelligence Platform (AIP). AIP is a relatively new product that adds generative AI capabilities to the core analytics platforms Gotham and Foundry. Together, these products enable companies to integrate and query data for insights that improve decision-making.
Palantir says the quality that sets its software apart from other data analytics products is an ontology-based architecture. Ontology refers to a software layer that links digital data to real-world objects and defines the relationships between them. Users can interact with the ontology with analytical tools for the purpose of analyzing information and automating tasks.
Palantir reported solid results in the third quarter. Customer numbers increased by 39% to 629, and the average existing customer spent 18% more. In turn, sales rose 30% to $726 million, marking the fifth consecutive increase in sales, and non-GAAP (non-generally accepted accounting principles) profits rose 43% to $0.10 per diluted share. Suffice to say, Palantir’s business is booming.
However, Malik Ahmed Khan op Morning star recently made an important distinction between the company and its stock. “If you look at the fundamental business quality, Palantir is an incredible name with a lot of opportunity in AI, and beyond AI into big data,” he told Yahoo Finance. “But looking at the valuation, it seems the fundamentals are not aligned.”
Wall Street expects Palantir’s adjusted profits to rise 31% over the next twelve months. That makes the current valuation of 188 times adjusted earnings seem absurdly expensive. Investors should avoid this stock, and current shareholders should consider reducing their positions. Unless earnings growth far exceeds expectations, Palantir’s stock is likely headed for a meltdown at some point.
Alphabet is the parent company of Google, a company with two major growth engines. First, Google is the largest ad tech company in terms of revenue, and digital ad spending is expected to grow 10% annually through 2028. Second, Google operates the third largest public cloud, and spending on cloud services is expected to grow by 19%. annually over the same period, according to International Data Corp.
One of investors’ most pressing concerns is that Alphabet will lose its dominance in web search as generative AI becomes more sophisticated. That would reduce the company’s ability to engage consumers and collect data, hurting its advertising business. But Alphabet is using the AI expertise built up over decades to tackle the problem.
For example, the company recently added generative AI overviews to Google Search to help internet users understand topics faster. CEO Sundar Pichai says these improvements increase usage and satisfaction, especially among young adults. The company has also introduced AI tools that generate media content for advertising campaigns and tools that help brands target their ads more effectively.
In addition to advertising, Google is responding to the demand for AI cloud computing services. Forrester Research recently recognized the company as a leader in AI infrastructure solutions and foundational large language models. According to the Synergy Research Group, Google gained a percentage point of market share in these areas in the third quarter. In the meantime, Amazon And Microsoft lost share.
Alphabet reported encouraging financial results in the third quarter, exceeding expectations on both top and bottom lines. Revenue rose 15% to $88 billion, marking a sequential acceleration from 14% in the previous quarter. Meanwhile, GAAP earnings rose 37% to $2.12 per diluted share, reflecting a four percentage point increase in operating margin.
Wall Street expects Alphabet’s profits to rise 20% over the next twelve months. That makes the current valuation of 24 times earnings seem quite reasonable. Investors should feel comfortable buying a small position in this stock today.
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Suzanne Frey, a director at Alphabet, 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. Trevor Jennewine has positions in Amazon and Palantir Technologies. The Motley Fool holds positions in and recommends Alphabet, Amazon, Microsoft and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Palantir Stock vs. Alphabet Stock: Billionaire Ken Griffin Sells One, Buys Another was originally published by The Motley Fool
