Future Giants: 2 Stocks Set to Eclipse Palantir by 2028

Wall Street's next dominators are quietly assembling their arsenals—while Palantir plays catch-up.

Forget 'big data' buzzwords. These contenders are rewriting the rules of scalable growth.

1. The AI Juggernaut Wall Street Isn't Watching

While Palantir struggles to monetize government contracts, this under-the-radar play is turning enterprise AI into recurring revenue gold.

2. The Cloud Infrastructure Powerhouse

Every dollar spent on AI training flows through this company's ecosystem—and their margins make Palantir's look like a lemonade stand.

Bonus reality check: If these picks don't outperform, we'll happily eat our blockchain-powered hats. (Unlike certain analysts still pushing 2021's 'metaverse stocks.')

Image source: Getty Images.

The case against Palantir

As mentioned above, Palantir's business is phenomenal. Its software is becoming the building blocks for deploying AI in business and government, and it has the growth to show for it. In the second quarter, Palantir's revenue ROSE 48% year over year to more than $1 billion. That blew away expectations and showcases the unstoppable demand Palantir is experiencing.

The problem is that the growth rate is already baked into the stock.

One of the premier AI stocks over the past few years has been. Nvidia posted growth rates of more than 200% during its run, yet never traded for more than 46 times sales or 51 times forward earnings. Palantir has far exceeded those levels despite much slower growth.

PLTR PE Ratio (Forward) data by YCharts

Let's break down what growth it WOULD take for Palantir to trade at a reasonable level. If Palantir can sustain a 50% revenue growth rate over the next three years, it would increase its revenue from today's $3.44 billion total to $11.6 billion. If we give Palantir a 30% profit margin (its profit margin was 22% over the past 12 months), that would indicate Palantir would generate $3.5 billion in profits.

At today's $425 billion market cap, that would still price Palantir's stock at 122 times three-year forward earnings. This showcases how expensive Palantir's stock is, and indicates it could be ripe for a pullback.

As a result, I think it's possible that ASML and AMD could be larger than Palantir in three years by doing nothing different.

ASML and AMD don't have to do anything special to be worth more than Palantir

Both ASML and AMD are reasonably priced for their current business, and each is expected to put up respectable growth figures over the next few years, although still far slower than Palantir.

Using Nvidia's max valuation of about 50 times forward earnings as the high point for Palantir's earnings in three years ($3.5 billion), that would indicate the stock should be worth around $175 billion. As mentioned before, Palantir trades at around a $425 billion market cap right now, so this would indicate a substantial drop.

Both ASML and AMD are valued at around $275 billion, so Palantir's potential drop would cause these two to be worth more.

Palantir is an incredibly overvalued stock, but it has a strong and devoted following, and it may continue to defy traditional valuation metrics, similar to. Investors are more than capable of holding onto Palantir stock at elevated prices, so the correction to its price may never come, despite all factors indicating that it should.

I still think AMD and ASML will (and should) be valued higher than Palantir's stock, but investors will have to wait and find out if that turns out to be true.