Nvidia and Palantir Stocks: Wall Street Says to Buy 1 and Avoid the Other for 2026

Nvidia (NASDAQ: NVDA) and Palantir Technologies (NASDAQ: PLTR) are two of the most popular artificial intelligence stocks in the market. They are on different ends of the AI investment spectrum, with Nvidia focusing on hardware and Palantir on software investment. However, Wall Street thinks one is clearly a buy in 2026, while it's time to move on from the other.

I'm in complete agreement with analysts on this take, and I think investors need to be aware of which one has greater potential for 2026.

Image source: Getty Images.

Each company is at the top of its respective industry

Nvidia makes graphics processing units (GPUs), which are the computing units at the center of the generative AI buildout. Nvidia's GPUs and the other products that support them are the best available, and have become the go-to choice for many competitors in the AI arms race. GPUs have the unique ability to process multiple calculations in parallel, versus a CPU that can only do one. When you stack hundreds or thousands of GPUs together, you end up with incredible computing capacity, which is why they are tasked with completing difficult training tasks, such as those for AI models.

While there are other competitors to Nvidia, none of them have achieved the widespread dominance it has. Nvidia still owns the majority of the data center computing market, and has even sold out of cloud GPUs because demand is so high. Nvidia is the largest company in the world by market cap for a reason, and it will maintain its dominant position until AI spending is complete (which is projected to be through at least 2030).

Palantir makes AI-powered data analytics software that can be deployed in any situation where accurate and rapid data analysis is needed. Originally, Palantir's software was targeted to government audiences and has helped ensure successful military missions, vaccine distributions, and other tasks that required heavy analysis to ensure they went as smoothly as possible. This software was eventually packaged for enterprises, and it has seen rapid adoption in the commercial sector, too.

Both commercial and government clients remain an important part of Palantir's business today, and its move to integrate generative AI technologies with its AIP add-on has been a game changer for the company. Palantir has one key advantage over Nvidia: It's a software platform. This means that as long as Palantir's product is used, customers will be required to pay a recurring subscription fee for access to the software on a monthly or annual basis.

On the other hand, once Nvidia's clients have procured a GPU, that's all they need unless they need to increase computing capacity, upgrade, or replace burnt-out units. This makes Palantir a much better recurring revenue company, which is great for long-term investors.

Despite this advantage, Palantir isn't the favored stock on Wall Street.

Palantir's stock appears overvalued

According to Yahoo! Finance, the average analyst has a $252 one-year price target on Nvidia's stock, up from its price of $185 at this writing. That makes it a strong buy or buy for nearly every analyst that follows the stock. Palantir isn't as favored. Its average price target is $188, while the stock was at $177 at this writing. This places the majority of analysts in the hold category.

It's much better to own a stock that's predicted to go up versus one that's expected to stay flat, which is why Nvidia is the better pick. But why is Nvidia better? It all comes down to valuation. Palantir's stock has become incredibly expensive, and is valued at 414 times trailing earnings, versus Nvidia's 46.

NVDA PE Ratio data by YCharts

However, a better metric to focus on is forward earnings, which factors in growth expectations. If that metric is used, Palantir trades for 175 times FY 2026 earnings and Nvidia trades for 24 times FY 2027 earnings (ending January 2027) . That indicates that there are still multiple years of rapid growth baked into Palantir's stock price, while Nvidia only has a single year.

As a result, Nvidia looks like a great buy for the future, while Palantir's stock will likely stay flat as it grows into its very expensive price tag.

Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.