CryptoCurrency
Which Is the Better Red-Hot AI Stock?
Nvidia (NVDA) and Palantir (PLTR) have been two of 2024’s hottest stocks — Nvidia’s 179.6% year-to-date gain has made it the second-most valuable company in the world by market cap, while Palantir’s 153.3% gain has put it on the map as a mega-cap tech stock to be reckoned with, not to mention a new member of the S&P 500 (SPX).
Both stocks have benefitted from being key players in the AI revolution. Both companies have exciting futures ahead of them, but there is a key difference between the two that makes one the more compelling opportunity at this point in time. Which looks like the better choice for investors right now?
Massive Gap in Valuation on a Price-to-Earnings Basis
Nvidia’s 2024 surge has taken it to a relatively high valuation multiple of 47.5 times January 2025 earnings estimates. The S&P 500 trades at 24.7 times earnings, meaning that Nvidia is nearly twice as expensive as the broader market.
However, with consensus earnings per share projected to grow to $4.01 per share for the fiscal year ending in January 2026, Nvidia looks quite a bit more palatable at 33.6 times forward earnings. While this is still fairly expensive, it’s starting to look reasonable enough for a mega-cap powerhouse projected to grow earnings per share by over 40% for the year. While Nvidia sometimes catches flack from value-oriented investors for its above-average price-to-earnings multiple, Palantir is even more expensive.
The massive 153% YTD gain has pushed shares of Palantir to an incredible valuation of 122.4 times December 2024 earnings estimates. This is more than double Nvidia’s valuation and roughly five times the broader market. With the stock expected to grow earnings per share by 19.4% to $0.43 per share for December 2025, the stock’s valuation comes down a bit but is still trading at an exorbitant triple-digit multiple of 100.8 times forward earnings.
Looking Beyond Price-to-Earnings
Plus, it’s not just price-to-earnings that makes Palantir look significantly more expensive than Nvidia. When looking at the two stocks on a price-to-sales basis, a popular metric often used for evaluating high-growth names like technology stocks and software stocks, Palantir trades at an astronomical price-to-sales ratio of 35.3, while Nvidia trades for a high but comparatively cheaper 26.3 times sales.
What About the PEG Ratio?
Lastly, it’s worth comparing the two stocks based on their PEG ratios (price-to-earnings-to-growth ratio), a popular valuation metric useful for evaluating growth stocks like Nvidia and Palantir by accounting for earnings growth. PEG ratio is calculated by taking a stock’s price-to-earnings ratio and dividing it by its earnings growth rate. The lower the PEG ratio, the better a stock looks by this measure. Investors and analysts who utilize this metric typically view a PEG ratio of 1.0x or less to be undervalued.
So, how do Nvidia and Palantir stack up on this basis? Nvidia’s PEG ratio of 1.8 is a bit higher than ideal but not prohibitive. On the other hand, Palantir trades at a significantly higher PEG ratio of 10.4, indicating that it is likely overvalued even when accounting for its earnings growth.
Palantir is no doubt an exciting company, but it’s hard to sustain a valuation multiple like this, and it leaves little room for error — if the company falls short of analyst expectations or hits any speed bumps, shares could tumble quickly.
Is NVDA Stock a Buy, According to Analysts?
Turning to Wall Street, NVDA earns a Strong Buy consensus rating based on 39 Buys, three Holds, and zero Sells assigned in the past three months. The average NVDA stock price target of $152.86 implies 10.7% upside potential from current levels.
Is PLTR Stock a Buy, According to Analysts?
Turning to Wall Street, PLTR earns a Hold consensus rating based on four Buys, six Holds, and six Sell ratings assigned in the past three months. The average PLTR stock price target of $27.67 implies 36.2% downside potential from current levels.
Smarten Up
Wall Street analysts are far more constructive on Nvidia, and so is TipRanks’ proprietary Smart Score system. The Smart Score is a quantitative stock scoring system created by TipRanks. It gives stocks a score from one to 10, based on eight key market factors. Scores of eight, nine, or 10 are considered equivalent to an Outperform rating. Scores of four, five, six, or seven are considered Neutral, and scores of three or below are considered equivalent to an Underperform rating.
Nvidia boasts an Outperform-equivalent Smart Score of 9.
Meanwhile, Palantir receives a far less favorable Neutral Smart Score of 4.
Nvidia Is the Clear Choice
NVDA and PLTR are both high-flying AI stocks, and both are projected to grow earnings significantly in the year ahead. However, Nvidia is projected to grow earnings more than twice as much as Palantir. Despite this, Nvidia shares trade for a far cheaper valuation multiple. Nvidia is often criticized as an ‘expensive’ stock, but its forward earnings multiple is just a third of Palantir’s double-digit valuation, making it look downright cheap in comparison.
Plus, sell-side analysts rate Nvidia a Strong Buy and see an upside of 10.7% over the next 12 months, while they are considerably more cautious towards Palantir, rating it a Hold and forecasting a potential downside of 36.4% from current levels. This disparity in analyst views is another strong point in favor of Nvidia.
I’m bullish on Nvidia based on its significantly cheaper valuation and superior earnings growth, making it the clear-cut winner in this comparison of high-profile AI stocks. For investors looking to capitalize on the generative AI wave, Nvidia continues to look like a smart choice.
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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