NVIDIA Vs. Palantir: Which is the Best AI Stock to Buy for 2026?

Over the past year, NVIDIA Corporation NVDA rose 31.4%, while Palantir Technologies Inc. PLTR soared an impressive 150.8%. Does this mean Palantir is the better artificial intelligence (AI) stock for investors in the new year, or is there more to consider? After all, NVIDIA is a diversified and reasonably valued stock, while Palantir carries high risk due to its dependence on government contracts and lofty valuation. Let’s examine –  

Reasons to Be Bullish on NVIDIA 

NVIDIA remains optimistic about its future growth, driven by its competitive edge in the AI hardware market. Ongoing demand for its CUDA software platform is also expected to contribute to growth. NVIDIA now projects fiscal fourth-quarter 2026 revenues of approximately $65 billion, with about 2% margin of error. 

Strong demand for its innovative Blackwell chips and cloud graphics processing units (GPUs) has already helped NVIDIA deliver outstanding fiscal third-quarter 2026 results. The company reported revenues of $57 billion for the quarter, a 62% increase year over year and a 22% rise sequentially, according to investor.nvidia.com.

Both data center and gaming revenues increased in the quarter, and NVIDIA’s net income reached $31.91 billion, up from $19.31 billion a year earlier. This strong quarterly performance eases concerns that AI growth might be entering a bubble. 

Reasons to Be Bullish on Palantir 

Robust demand for Palantir’s Artificial Intelligence Platform (AIP) helped expand its U.S. commercial client base while maintaining valuable government contracts. The rapid adoption of AIP increased Palantir’s U.S. commercial segment revenues to $397 million in the third quarter, a 121% increase year over year and a 29% sequential rise, according to investors.palantir.com. 

For the quarter, government revenues reached $486 million, representing a 52% year-over-year increase and a 14% quarter-over-quarter rise, with total revenues of $1.18 billion, a 63% year-over-year increase and an 18% sequential rise, easily surpassing market expectations. Notably, Palantir generated nearly half a billion dollars in GAAP net income during the quarter, said CEO Alex Karp. 

An anticipated increase in large AI enterprise contracts is expected to drive Palantir’s future growth, with the company projecting full-year revenues between $4.396 billion and $4.400 billion. 

2026 AI Investing: Should You Choose NVIDIA or Palantir? 

NVIDIA is well-positioned to grow in the near term, leveraging its strong presence in AI hardware and software, with high demand for its next-generation chips easing AI bubble worries. Palantir may also see solid growth ahead due to the rising adoption of its AI Platform among commercial and government clients. 

However, Palantir’s valuation raises concerns. Its forward price-to-earnings (P/E) ratio of 250.36 significantly exceeds the Internet-Software industry’s average of 39.25, increasing the risk of a price decline if the broader market pulls back.   

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Conversely, despite continuous growth, NVIDIA is reasonably valued with a forward P/E of 39.44, lower than the Semiconductor - General industry’s average of 44.97. NVIDIA’s diversified business model across AI hardware, software and gaming provides additional market resilience.  

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In contrast, Palantir’s dependence on government contracts exposes it to political risks like regulations and policy shifts. 

Therefore, investing in Palantir involves higher risk, making it more suitable for risk-takers. Conservative investors should consider NVIDIA for steady, reliable growth. Currently, NVIDIA holds a Zacks Rank #1 (Strong Buy), while Palantir is rated Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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