Practically each firm that is even remotely associated to the tech trade is betting that synthetic intelligence (AI) will probably be a key driver of their enterprise within the coming years. That is giving traders lots of decisions relating to choosing an AI inventory.
Two firms which have seen their share costs surge just lately and are little doubt on some traders’ AI inventory brief lists are telecommunications large AT&T (T 0.83%), which is important to connecting AI units to the web, and AI information analytics firm Palantir Applied sciences (PLTR 0.97%).
This is how the 2 firms stack up within the AI house.
Picture supply: Getty Pictures.
How each firms are benefiting from the AI demand
AT&T is probably not the primary firm you consider whenever you’re enthusiastic about AI shares, however the telecom’s huge wi-fi web infrastructure is a key part to advancing AI companies. For instance, AT&T’s ultra-fast 5G networks are used for AI-powered tech like autonomous autos.
Web-enabled units have gotten extra highly effective and extra helpful with AI, making quick and dependable web connections much more necessary to powering AI assistants and different companies. AT&T additionally works with tech giants, together with Alphabet‘s Google and Microsoft, to ascertain edge community computing companies that guarantee AI and different companies work nicely in particular areas.
However whereas AT&T helps with the connectivity of AI units, Palantir is an precise synthetic intelligence firm. Palantir sells AI-powered analytics companies and has grown quickly because the U.S. authorities and personal firms have clamored for its companies.
Utilizing AI to energy analytics may also help with all the things from protection and navy operations to managing provide chains and monitoring the electrical grid. This vast utility of companies implies that Palantir has a complete addressable market of $1.4 trillion, based on Morningstar information.
Which firm is rising sooner?
It ought to come as no shock that Palantir is rising a lot sooner than AT&T. As a big, established telecom, there’s solely a lot gross sales progress AT&T can expertise.
AT&T’s gross sales rose 2% within the first quarter to $30.6 billion, and non-GAAP (adjusted) earnings elevated 6% to $0.51 per share. The corporate’s administration forecasts free money movement of $16 billion for 2025 and adjusted earnings per share of $2.02, on the midpoint of steering.
In the meantime, Palantir’s income spiked 39% within the first quarter to $884 million, and adjusted earnings rose 62% to $0.13 per share. Palantir is worthwhile, which not many younger AI start-ups can declare, and the corporate truly raised its outlook for this yr, in distinction to the numerous firms which have pulled their outlooks for 2025. It now expects full-year gross sales to extend 36% for the yr, up from its earlier estimate of 31%.
Palantir is the clear winner
AT&T’s telecom companies are necessary to many AI firms, however Palantir is the higher AI pure play. Its AI analytics income is rising quick, the corporate is worthwhile, and it is tapping into a large market that is simply getting began.
However earlier than you mash the purchase button in your brokerage app, it is necessary to say that whereas Palantir is the higher AI inventory on this matchup, it is also very costly. Palantir’s trailing price-to-earnings ratio is an astronomical 546. Examine that to the S&P 500‘s P/E a number of of 24 and Nvidia (one other main AI inventory) at simply 45.
Which means that if you happen to’re contemplating shopping for Palantir inventory, you may wish to anticipate its share value to dip a bit or begin with only a small place. The inventory’s huge features over the previous couple of years have pushed its valuation so excessive that it is exhausting to justify the premium.
That does not imply Palantir’s inventory will not proceed to achieve floor, however traders must know that they are paying an especially excessive value for the inventory in the event that they purchase now.
Suzanne Frey, an government at Alphabet, is a member of The Motley Idiot’s board of administrators. Chris Neiger has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Alphabet, Microsoft, Nvidia, and Palantir Applied sciences. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
