Should Investors Buy AMD Stock Instead of Palantir Stock? | PLTR Stock vs. AMD STock

SUMMARY

Parkev Tatevosian, CFA, compares Palantir and AMD, two leading AI stocks, across revenue growth, profitability, and valuation metrics. He concludes that Palantir offers superior growth prospects, profitability, and competitive positioning for long-term investors.

MAIN POINTS

• Palantir and AMD are introduced as leading AI stocks, with a focus on comparing their investment potential. [0:00]
• Palantir is projected to achieve stronger revenue growth than AMD over the next three years, despite both companies performing well. [1:01]
• Palantir demonstrates a higher return on invested capital compared to AMD, with recent peaks surpassing AMD's historical highs. [2:01]
• Palantir's software-based business model is highlighted as more profitable and competitively advantaged than AMD's hardware focus. [3:01]
• Valuation analysis shows Palantir as fairly valued and AMD as overvalued based on discounted cash flow calculations. [4:01]
• The final recommendation favors Palantir as the better AI investment, with additional information about fiscal.ai as a research source. [5:00]

DETAILED ANALYSIS

Palantir and AMD are evaluated as two of the most prominent AI-focused companies, each excelling in different areas of the technology sector. Over the past three years, both firms have achieved impressive revenue growth, but Palantir's acceleration in this metric stands out, with recent quarterly growth rates exceeding 80%. This rapid expansion is attributed to strong demand for Palantir's software solutions among enterprises and institutions.

In contrast, AMD's growth is driven by its expanding presence in the data center market, particularly through its CPUs and newly introduced GPUs, which are increasingly vital for modern computing infrastructure.

When comparing return on invested capital, Palantir has shown remarkable improvement, reaching a peak of 137%, far surpassing AMD's best years of 81% and 67% in 2020 and 2021. This efficiency is achieved with relatively low capital investment, highlighting Palantir's ability to scale profitably. AMD, while generating higher revenues, has not matched its previous peaks in capital returns, indicating a less efficient conversion of investment into profit.

Valuation is a key differentiator in the analysis. On a forward price to operating cash flow basis, Palantir trades at a premium (83 versus AMD's 58), which is justified by its superior growth and profitability metrics. Palantir's software-centric business model typically yields higher and more sustainable profit margins compared to AMD's hardware sales, which face intense competition from companies like Nvidia and Intel.

In its sector, Palantir is recognized as the clear leader, often considered several steps ahead of competitors, while AMD's position is more contested, particularly in GPUs where Nvidia dominates.

Discounted cash flow valuations suggest Palantir is fairly valued at $134 per share, close to a calculated fair value of $126, whereas AMD is considered overvalued at $450 against a fair value estimate of $273. Although market multiples suggest AMD is less expensive, the overall assessment favors Palantir due to its growth trajectory, profitability, and competitive edge. The recommendation is clear: for investors seeking exposure to AI, Palantir represents the stronger long-term opportunity.

LINKS

• Parkev Tatevosian YouTube channel membership page
• Special offer for The Motley Fool Stock Advisor
• Parkev Tatevosian's book on stock investing framework
• Fiscal.ai investment research platform with affiliate discount
• Webull investing platform with bonus shares offer
• Parkev Tatevosian's Substack newsletter subscription

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