There may not be a hotter stock on Wall Street right now Palantir Technologies. The company’s artificial intelligence (AI) software is fueling its growth engine, and there are major market opportunities in both government and private sectors. The stock is up about 800% since the start of last year.
Be warned. Momentum can sometimes push stock prices to irrational heights, and Palantir’s valuation has become arguably unsustainable at more than fifty times the company’s revenue.
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There may be a better AI stock to buy now. ASML (NASDAQ: ASML) plays a crucial role in the production of cutting-edge chips that power AI technology. However, the company’s geopolitical issues have suppressed its stock price, creating buying opportunities for long-term investors.
Here’s what you need to know.
There is a difference between a company and its shares. Palantir makes a compelling case that it’s a great company. The data analytics software has become increasingly widespread among government and enterprise customers, and the AIP platform, which helps companies implement AI applications, has fueled its growth. Palantir’s revenue grew 30% year over year in the third quarter, a continued acceleration that has investors excited about the company’s future.
But as I said above, the stock has multiplied from just under two years ago. In fact, at a price-to-sales Based on the numbers, stocks are more expensive today than they were during the 2021 Everything Bubble, a stock market bubble that resulted from zero interest rate fiscal policies following the COVID-19 pandemic:
This probably won’t end well. Stocks generally don’t sustain sky-high valuations like this, and it will take years of the stock going nowhere, or a dramatic drop before Palantir’s valuation becomes sensible again. In other words: this is not the stock you want to invest fresh money into right now.
On the other hand, ASML has moved in the opposite direction since the stock reached its peak in July. ASML designs and produces special equipment, called lithography machines, for the production of semiconductors (chips). It is an important cog in the technology supply chain because it is the only company That makes extreme ultraviolet lithography (EUV) machines necessary to produce high-quality chips, such as those used in AI data centers.