The issue with Palantir is that its stock seems to reflect its existing customer base. Currently, Palantir's stock is valued at an astonishing 65 times sales and 358 times earnings. In contrast, the popular AI stock Nvidia (NASDAQ: NVDA) is trading at 51 times earnings and 28 times sales, despite growing at a substantially faster rate, making Palantir appear considerably more expensive. To match Nvidia's current valuation, Palantir would need to significantly boost its growth - much more than what it is currently exhibiting. Assume Palantir accomplishes two things: increasing its profit margin to 30% from 20%, and achieving 40% companywide revenue growth. Even then, it would take over four years for its stock price to reach Nvidia's valuation (excluding stock-based compensation effects). This scenario involves the stock price stagnating and maintaining an elevated growth rate. These projections are unlikely, particularly given the constraint of Palantir's product pricing. Hence, it may be wise for investors to shift focus to a new AI stock for 2025, since there are other appealing options without such high expectations embedded in them. Should you invest $1, 000 in Palantir Technologies now?

Before deciding, consider this: The Motley Fool Stock Advisor team has pinpointed what they consider the top 10 stocks for investors to purchase right now, and Palantir Technologies is not on that list. The selected 10 stocks have the potential for substantial returns in the upcoming years. For example, Nvidia made this list on April 15, 2005. If you had invested $1, 000 based on their recommendation back then, it would have grown to $800, 876 by now. * Stock Advisor offers investors a straightforward plan for success, featuring portfolio-building guidance, regular analyst updates, and two new stock recommendations each month. Since 2002, their Stock Advisor service has more than quadrupled the returns of the S&P 500. * Discover the 10 stocks » *Stock Advisor returns as of December 16, 2024 Keithen Drury owns shares in Nvidia. The Motley Fool owns and recommends Nvidia and Palantir Technologies. The Motley Fool has a clear disclosure policy.