Should You Forget Palantir and Buy These 2 Artificial Intelligence (AI) Stocks Instead?

Key Points

• Palantir's rapid growth has made it an expensive investment.

• Meta has invested heavily in AI talent and infrastructure, and it's planning to use AI tech to bolster its ad services.

• Voice AI company SoundHound AI recently reported revenue growth of 151% and has a substantial order backlog.

• 10 stocks we like better than Palantir Technologies ›

Palantir Technologies (NASDAQ: PLTR) is one of the hottest artificial intelligence (AI) stocks, trading up an impressive 393% over the last year. To put it another way, if you had invested $10,000 in Palantir a year ago, your investment would be worth about $48,500.

Palantir offers AI-powered data analytics, and its share price has taken off largely because of the success of its Artificial Intelligence Platform (AIP) services. It's a profitable and growing business, which can make for an attractive investment and that has caught the attention of the market. As a result, it's trading at a sky-high price-to-earnings (P/E) ratio of 584. Growth stocks often have high valuations, but even allowing for that, Palantir stock is still an extremely expensive investment right now.

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Instead of paying a hefty premium to own Palantir, you might want to consider these two growing AI stocks with much more favorable valuations.

Image source: Getty Images.

Meta Platforms

CEO Mark Zuckerberg has made it clear that he wants Meta Platforms (NASDAQ: META) at the forefront of the AI revolution, and he's sparing no expense to make it happen. He was rumored to be offering signing bonuses of $100 million to lure away select employees at OpenAI, the developer of ChatGPT.

The focus on attracting top talent has been successful so far. On June 30, Meta started Meta Superintelligence Labs (MSL), which will house its AI foundation models, products, and research projects. The team includes recent hires Alexandr Wang (ex-CEO of Scale AI, which Meta acquired for $14.3 billion last month), Nat Friedman (former CEO of Github), and Daniel Gross (co-founder of Safe Superintelligence Inc.).

Meta is also investing heavily in its AI infrastructure. In May, it announced that it would boost its capital expenditures to between $64 billion and $72 billion in 2025, a significant increase from $37.3 billion in 2024. There have also been recent reports that Meta is seeking to raise $29 billion from private capital firms to build AI data centers.

Meta can afford to spend this kind of money because of its strong financials. Revenue was $42.3 billion in the first quarter of 2025, a 16% year-over-year increase. Net income was $16.6 billion, a 35% increase. It has an ample $70.2 billion in cash, cash equivalents, and marketable securities, compared to $28.8 billion in long-term debt.

It's fair to wonder if Meta's AI investment will go the way of its much-maligned investment in building the metaverse. But the tech giant is getting more results out of AI than it ever did from the metaverse. Its AI assistant, Meta AI, quickly reached 1 billion active monthly users. In addition, AI is a better fit for how Meta makes money -- advertising, which accounts for 98% of its revenue.

Meta already offers AI tools that advertisers can use to improve ad performance. By the end of next year, it aims to provide fully automated AI ads. If Meta's AI tools help businesses get more out of their marketing budgets, that could help it continue to improve its revenue numbers. With its proven success and ambitious AI goals, Meta strikes me as a stronger AI investment than Palantir.

Trading at a P/E ratio of 28 at the time of this writing, Meta is much cheaper than Palantir. It's also the second-cheapest stock of the Magnificent Seven, as you can see in the table below. PE ratio isn't everything, but it's an indicator that Meta could be a better value than many of its tech peers.

Data by YCharts.

SoundHound AI

SoundHound AI (NASDAQ: SOUN) is a young tech company that develops voice AI solutions. It offers voice platforms and agents that companies can use to automate tasks and reduce costs, with 25 languages currently available.

What's exciting about SoundHound is how its products can benefit companies across a range of industries. Restaurants can use voice AI for drive-thru and kiosk ordering. Auto companies incorporate SoundHound for in-car voice assistance. Healthcare companies can use SoundHound's Amelia AI agents for patient support, including managing appointments and getting treatment information. Those are just a few of many use cases for SoundHound's products.

SoundHound is still a relatively small company in the early stages of its development. It's not profitable yet -- while it technically posted a profit in the first quarter of 2025, that was due to an adjustment in the value of contingent liability acquisitions, meaning it's not something that's replicable.

Revenue growth was the big story from that first-quarter earnings report, increasing 151% year over year to $29.1 million. Total cash and cash equivalents were $246 million, and the company doesn't have any debt.

Even though SoundHound is currently losing money, its balance sheet is in pretty good shape. Another positive sign is a $1.2 billion order backlog, lasting for about six years, which averages out to $200 billion per year. That should allow it to continue increasing its revenue.

SoundHound is a volatile company, and it's trading at a price-to-sales (PS) ratio of 40. It's expensive, but still nowhere near as expensive as Palantir, which trades at a P/S ratio of 107. And the AI voice market has tremendous growth potential -- research company SNS Insider expects it to grow by 32.5% annually until 2032. Although SoundHound is a high-risk investment, in a best-case scenario, this AI stock could skyrocket in value.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, 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. Lyle Daly has positions in Nvidia and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.