TLDR
- Morgan Stanley recommends Nvidia over Palantir as the better AI stock buy right now
- Nvidia posted Q1 revenue of $44.1 billion, up 69% year-over-year, beating expectations by $810 million
- Palantir’s stock has surged 1,291% over three years but analysts warn the valuation may be stretched at 95x future cash flow
- Nvidia receives Strong Buy rating with $172 average price target, while Palantir gets Hold rating with $100 target
- Both companies are riding the AI boom, with the global AI market expected to grow from $189 billion to $4.8 trillion by 2033
The artificial intelligence market is set for explosive growth. A UN Trade & Development report shows the global AI market will expand 25 times from $189 billion in 2023 to $4.8 trillion by 2033.
Morgan Stanley analysts have weighed two major AI players and made their choice. They recommend Nvidia over Palantir Technologies as the better investment opportunity right now.
Nvidia dominates the AI chip market with a $3.45 trillion market cap. The company supplies high-performance GPUs that power AI systems across the tech industry. Its stock has gained 660% over the past three years following the AI boom that started with ChatGPT’s launch in late 2022.
The chip giant continues pushing innovation boundaries. In May, Nvidia unveiled the world’s largest quantum computing research supercomputer, the ABCI-Q. Last week, the company announced its Blackwell architecture showed superior performance on MLPerf Training benchmarks.
Nvidia’s latest quarterly results demonstrate strong momentum. First quarter fiscal 2026 revenue reached $44.1 billion, up 69% year-over-year. The figure beat expectations by $810 million. Non-GAAP earnings per share came in at 81 cents, six cents above forecasts.
Data center revenue drove most of the growth at $39.1 billion, up 73% from the previous year. The company reported gross margins of approximately 61% for the quarter.
CEO Jensen Huang highlighted growing demand during the earnings call. He noted that AI inference token generation has surged tenfold in one year. Huang expects AI agents becoming mainstream will accelerate demand for AI computing.
Strong Buy Rating for Nvidia
Morgan Stanley analyst Joseph Moore rates Nvidia as Overweight with a $170 price target. Moore believes the company’s prospects remain strong despite recent volatility. He points to improving gross margins and sustained customer demand as key factors.
The broader analyst community agrees with this positive outlook. Nvidia holds a Strong Buy consensus rating based on 40 reviews. The breakdown includes 35 Buy ratings, 4 Holds, and 1 Sell. The average price target of $172.36 suggests 22% upside potential.
Palantir Technologies presents a different story. Founded by Peter Thiel in 2003, the company specializes in data analytics and software solutions. Its stock has soared 1,291% over three years, including 69% gains year-to-date.
The company serves over 760 customers across public and private sectors. Major clients include Stellantis, BP, and the US Department of Defense. Palantir recently received a $795 million contract modification for its Maven Smart System with the Army.
Palantir’s AI Platform allows users to interact through natural language without coding skills. The platform supports multilingual inputs and translation frameworks. This accessibility has helped drive customer adoption across various industries.
Valuation Concerns for Palantir
First quarter 2025 results showed revenue of $883.9 million, representing 39% year-over-year growth. The figure exceeded forecasts by $21.72 million. Non-GAAP earnings per share reached 13 cents, meeting analyst expectations.
However, Morgan Stanley’s Sanjit Singh expresses caution about Palantir’s valuation. Despite strong fundamentals, he believes the stock trades at stretched levels. The current valuation of approximately 95 times future cash flow makes returns challenging to justify.
Singh maintains an Equal Weight rating with a $98 price target. This implies a potential 25% decline from current trading levels. He prefers waiting for a better entry point before turning more bullish.
The Street consensus reflects similar caution. Palantir holds a Hold rating based on 18 analyst recommendations. The breakdown shows 3 Buys, 11 Holds, and 4 Sells. The average price target of $100.13 suggests 22% downside risk.
Both companies benefit from the AI revolution sweeping through technology markets. However, Morgan Stanley’s analysis points to Nvidia as the superior choice given current valuations and growth prospects.
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