Should You Forget Palantir and Buy These 2 Millionaire-Maker Stocks Instead?
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Palantir has been running on all cylinders, but the stock’s valuation has become extremely frothy.
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SoundHound AI is in hypergrowth mode and has a huge opportunity with agentic AI.
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AppLovin is looking to move beyond gaming ads into much bigger markets.
Palantir Technologies (NASDAQ: PLTR) has been one of the hottest names in artificial intelligence (AI). The company built a powerful platform that pulls together data from everywhere and maps it to real-world assets so that organizations can actually do something with all that information. Its Artificial Intelligence Platform (AIP) is used for everything from helping hospitals spot sepsis earlier to helping companies identify potential supply chain risks. The applications for AIP are massive and growing fast.
Last quarter, Palantir saw its revenue jump 48% to $1 billion, with U.S. commercial sales nearly doubling and government revenue up 53%. The company is quickly adding new customers, while existing customers are spending a lot more too, which was evident by its impressive 128% net dollar retention.
With numbers like that, you’d think this is a stock to pile into, but there’s a catch. Palantir trades at a forward price-to-sales (P/S) multiple of more than 105 times 2025 revenue estimates. That’s not earnings, that’s sales, which makes the stock very expensive by any standard. The company is executing well, but at that kind of valuation, expectations are high and there is little margin for error.
For investors who don’t want to pay up for perfection, there are other high-upside AI-driven growth stories trading at far cheaper valuations that are growing revenue even faster.
Trading at a forward P/S multiple of 43, SoundHound AI (NASDAQ: SOUN) stock is not cheap, but it’s a lot less expensive than Palantir. It’s also been growing at a much more rapid pace. Last quarter, its revenue surged 217% year over year to $42.7 million, and management expects to reach adjusted EBITDA profitability by the end of 2025.
The company is taking a different path when it comes to AI. It started out in voice recognition but has evolved into a voice-first AI platform designed to power the next generation of AI agents. Its technology processes speech-to-meaning and deep-meaning understanding in real time, allowing it to understand a user’s intent even before a speaker finishes talking, much like humans do. That’s a real advantage as AI shifts from simple chatbots to agents that can plan and execute tasks through natural conversation.
The company’s acquisition of Amelia last year expanded SoundHound’s reach into industries like healthcare and finance that require specialized knowledge and regulatory compliance. By combining Amelia’s conversational intelligence with its own speech-to-meaning platform, SoundHound created Amelia 7.0, which acts more like a digital employee than a traditional virtual assistant. It can integrate with systems like enterprise resource management (ERP) and customer relationship management (CRM), resolve problems, and complete transactions end-to-end. That’s a big leap from just answering questions.
It’s already migrating 15 of its largest clients to Amelia 7.0, and it has recently acquired a company called Interactions to help better orchestrate its AI agents. However, the company is still at just the very start of its journey when it comes to agentic AI.
The stock is still speculative and competition in AI agents is fierce, but its voice-first approach could become a huge differentiator. For investors willing to take on some risk, the upside here could be significant.
AppLovin (NASDAQ: APP) is another rapidly growing company whose valuation is less than half of that of Palantir, with the stock trading at a forward P/S multiple of under 42. Last quarter, its revenue surged 77% to $1.26 billion while adjusted EBITDA nearly doubled to $1 billion.
The company reinvented itself from a mobile gaming app company into an AI adtech powerhouse. Its Axon 2.0 engine uses AI to decide in real time which ads to serve, how much to bid, and where to place them. The platform has proven to be highly effective, leading to explosive growth.
So far, most of this growth has come from mobile gaming ads, but management is just beginning to roll out the same technology to e-commerce and broader web advertising. That’s an exponentially larger market, which some analysts have pegged as being 20 times bigger.
The company is also launching a self-serve ad manager that should open its platform to more advertisers and accelerate international growth. UBS analysts recently noted that early checks point to strong demand from web-based advertisers, while Morgan Stanley noted that non-gaming ad customers have been limited to less than 700 advertisers, so this segment of its business could grow rapidly.
AppLovin is a high-reward stock, but if Axon 2.0 works as well outside gaming as it has inside it, the stock could have a lot of upside from here.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.
Should You Forget Palantir and Buy These 2 Millionaire-Maker Stocks Instead? was originally published by The Motley Fool