Why Wall Street Backs Nvidia and Cautions on Palantir’s Valuation

Nvidia and Palantir are both frequently highlighted as major beneficiaries of the artificial intelligence boom, yet Wall Street analysts are drawing very different conclusions about their futures. Nvidia, now valued at more than 4 trillion dollars, continues to be viewed as the dominant supplier of AI infrastructure with a strong pipeline of demand. 

Palantir, on the other hand, has seen its stock soar in 2025 thanks to a wave of government contracts and interest in its AI platforms, but many analysts believe its valuation has outpaced its financial fundamentals.

The diverging views create a striking contrast. One is being recommended as a buy, the other as a sell. This article explores the reasons behind the split, comparing fundamentals, growth drivers, and risks to understand why Wall Street favors Nvidia while urging caution on Palantir.

Nvidia: Momentum, Scale and AI Infrastructure Dominance

Nvidia has cemented its position as the central player in artificial intelligence infrastructure, supplying the high-performance chips that power most large language models and data centers worldwide. The company’s dominance is reflected in its scale. Nvidia is now valued at more than 4 trillion dollars, making it one of the most valuable public companies in history. Analysts largely remain optimistic, with a majority rating the stock a “buy” and maintaining price targets that suggest further upside.

The optimism stems from sustained demand in data centers and AI workloads. Nvidia’s graphics processing units (GPUs) are not only widely used in training models but are also essential for inference, the process of running applications in real-world settings. 

Analysts point to the company’s extensive ecosystem of software, hardware, and partnerships as a competitive advantage that is difficult to replicate. According to MarketWatch, even controversial strategic moves, such as tighter licensing policies, may ultimately strengthen Nvidia’s market position.

However, the company’s rise has not come without challenges. Geopolitical restrictions, particularly U.S. export limits on advanced chips to China, create uncertainties. In addition, its valuation is considered high, raising questions about sustainability if growth slows. 

Even so, Nvidia’s central role in the AI supply chain gives it resilience that few competitors can match, which explains why Wall Street continues to view it as the stronger bet compared with many other AI-related stocks.

Palantir: The Hype, The Contracts and the Valuation Squeeze

Palantir has enjoyed a surge in attention during 2025 as demand for its data analytics and AI-driven platforms has expanded, especially in government sectors. The company recently secured large defense and intelligence contracts, including a renewed U.S. Army enterprise deal, which boosted confidence in its long-term pipeline. 

Revenue momentum has followed, with Palantir surpassing $1 billion in quarterly sales earlier this year while continuing to expand its margins. Supporters argue that the firm has a strong foothold in critical areas where security and advanced analytics overlap.

Despite these developments, Wall Street’s view of Palantir remains cautious. Analysts frequently point to its lofty valuation. The stock trades at a forward earnings multiple far above industry averages, making it vulnerable if growth fails to keep pace. 

According to Yahoo Finance, consensus forecasts currently imply a potential downside for the stock of more than 10%, in contrast to Nvidia’s projected upside. Another concern is Palantir’s reliance on government business, which, while lucrative, exposes it to budget cycles and political changes.

The excitement around Palantir reflects both genuine progress and speculative enthusiasm. While the company has established itself as a key AI player in sensitive industries, its stretched valuation leaves little room for missteps. This tension helps explain why many analysts are urging investors to tread carefully, even as the headlines around Palantir remain positive.

Comparative Metrics and Wall Street’s “Buy One, Sell the Other” Logic

A side-by-side look at Nvidia and Palantir highlights why analysts have arrived at opposite recommendations. Nvidia is forecast to deliver strong earnings growth with analysts expecting its revenue to continue climbing on the back of AI and data center demand. 

Palantir, while profitable and expanding, shows a slower growth profile relative to its market value. According to Yahoo Finance, Wall Street projects an upside potential of more than 15 percent for Nvidia, while Palantir’s consensus price target signals a possible decline of roughly 10 to 15 percent.

Valuation is the critical dividing line. Nvidia trades at a high multiple, but its profitability and scale make it easier to justify. Palantir’s price-to-earnings ratio remains far higher, creating what many analysts see as a valuation squeeze, where expectations have outpaced financial results. Institutional investors are also more heavily concentrated in Nvidia, reflecting greater confidence in its ability to sustain momentum.

The broader context adds weight to these views. Analysts caution that AI-driven stocks are vulnerable to corrections if sentiment shifts, with some warning of conditions similar to past technology bubbles. Yet Nvidia’s dominance in supplying the infrastructure for AI is widely viewed as a buffer against severe pullbacks. Palantir, in contrast, faces more skepticism since its contracts, while substantial, do not guarantee the kind of exponential growth investors appear to be pricing in. This disparity explains the consistent “buy Nvidia, avoid Palantir” guidance appearing in market reports.

Conclusion and Takeaways:

The contrasting recommendations on Nvidia and Palantir reflect a simple distinction. Nvidia is seen as the backbone of AI infrastructure with growth that matches its valuation, while Palantir is considered a promising but overextended stock. Analysts argue that Nvidia’s scale and profitability give it resilience, whereas Palantir’s stretched multiples leave little margin for error.

Investors will need to monitor several factors in the months ahead. Nvidia’s earnings updates and potential regulatory actions on chip exports will be critical, as will Palantir’s ability to diversify beyond government contracts. Broader market sentiment toward AI stocks will also play an important role.

For now, Wall Street’s position is clear. Nvidia remains the preferred choice for exposure to AI-driven growth, while Palantir is viewed with caution. The divide underscores how differently the market judges scale, profitability, and valuation in the rapidly evolving AI sector.