Palantir Technologies (PLTR 1.73%) has seen its stock price surge about 50% this year, impressing investors with its accelerating revenue growth and rising profits. In 2023, Palantir’s revenue increased by 17%, and the company projects 20%-21% growth for 2024 as its government sector stabilizes and its U.S. commercial business gains momentum. Additionally, Palantir has maintained profitability for six consecutive quarters, with analysts forecasting a 71% earnings growth this year.
Palantir
Looking ahead to 2026, analysts expect Palantir to achieve a compound annual growth rate (CAGR) of 20% in revenue and 56% in earnings per share (EPS). This optimistic outlook, combined with Palantir’s potential in the AI market, has driven its stock higher.
However, Palantir’s stock is currently expensive, trading at 21 times this year’s sales. Maintaining these premium valuations could be challenging if macroeconomic and competitive pressures impact its near-term growth. For those concerned about the stock’s potential decline, two other AI companies, Super Micro Computer (SMCI 6.23%) and Baidu (BIDU -1.15%), might offer better value over the next three years.
NYSE: PLTR
Palantir Technologies
- Today’s Change: 1.73% (US$0.47)
- Current Price: US$27.70
- Market Cap: $62B
- Gross Margin: 81.16%
- Dividend Yield: N/A
What Do These Two AI Companies Do?
Super Micro Computer (Supermicro): Known for high-performance, liquid-cooled servers, Supermicro generates about half of its revenue from dedicated AI servers. Its long-term partnership with Nvidia provides early access to cutting-edge data center GPUs. Bank of America projects its market share in the dedicated AI server sector to grow from 10% to 17% over the next three years.
Baidu: As the largest online search engine in China, Baidu also owns a majority stake in iQiyi (a leading streaming platform), the Apollo software platform for autonomous vehicles, and the Baidu AI Cloud platform. While it primarily earns revenue from online ads, Baidu is diversifying with Managed Business Pages and enhancing its mobile app. It is also expanding its non-marketing divisions (cloud, AI, etc.) to mitigate exposure to the advertising market.
Why Could These Two Companies Become More Valuable Than Palantir?
Both Supermicro and Baidu are currently cheaper relative to their expected sales growth over the next three years.
| COMPANY | MARKET CAP | PRICE-TO-SALES RATIO (CURRENT YEAR) | ESTIMATED REVENUE CAGR (NEXT 3 YEARS) |
|---|---|---|---|
| Palantir | $57.6 billion | 21.3 | 20% |
| Supermicro | $49.6 billion | 3.3 | 58% |
| Baidu | $31.0 billion | 1.6 | 6% |
Source: Yahoo Finance, MarketScreener
If Palantir sustains its high price-to-sales ratio through 2026, it could be worth $80.6 billion in a bullish scenario. However, macroeconomic or competitive challenges could halve its price-to-sales ratio.
If Supermicro meets analysts’ expectations and maintains its current price-to-sales ratio, it could be worth about $93 billion by 2026. Its valuation could increase further if it’s reclassified as a high-growth AI stock rather than just a traditional server manufacturer like Dell Technologies.
Baidu’s growth has been hindered by competitive and macroeconomic issues in China, and its valuation is depressed due to U.S.-China tensions. If these tensions ease, Baidu’s stock might trade at 4-5 times its forward sales, as it did four years ago. Meeting analysts’ estimates and trading at 4 times sales by 2026 could value Baidu at $88 billion. This base case scenario could improve significantly if Baidu’s new cloud and AI investments boost sales.
