Key Points
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Nvidia just reported stunning fourth-quarter results.
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This gives credence to Palantir’s contention that enterprise AI adoption continues to gain steam.
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Palantir’s Artificial Intelligence Platform (AIP) is the linchpin of its recent success, and there could be much more to come.
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The past several years have been a nonstop thrill ride for Palantir (NASDAQ: PLTR) stock investors. When the artificial intelligence (AI) revolution kicked off in early 2023, the data mining and AI expert was ready. With 20 years of experience in the field, Palantir pivoted to create its Artificial Intelligence Platform (AIP), which has become the leading software system for helping businesses make real-time, data-driven decisions. AIP integrates deeply with existing business systems, adding a layer of generative AI and providing actionable insights that managers can use.
Since AIP debuted in April 2023, Palantir stock has become a massive multibagger, soaring 1,490%. However, the stock’s egregious valuation and questions about the future of AI have investors looking for evidence that things are still on track.
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Nvidia‘s (NASDAQ: NVDA) quarterly financial report left no doubt that AI adoption continues unabated.
Image source: Getty Images.
Remarkable results
For its fiscal 2026 second quarter (ended Jan. 25), Nvidia generated record revenue that soared 73% year over year and 20% sequentially to $68.1 billion. This drove adjusted earnings per share (EPS) up 82% to $1.62.
For context, analysts’ consensus estimates called for revenue of $66.2 billion and EPS of $1.54, so Nvidia scaled both bars with ease.
A record-setting performance from the data center segment continued to be the company’s biggest growth driver. The segment, which includes chips used in cloud computing, AI, and data centers, delivered sales that surged 75% year over year to $62.3 billion, driven by — you guessed it — the ongoing adoption of AI.
Why does it matter to Palantir investors?
While the results are obviously positive for Nvidia investors, they provide keen insight into the state of AI. Nvidia is the de facto bellwether for AI adoption, as it controls 92% of the data center graphics processing unit (GPU) market, where most AI processing occurs.
While Nvidia’s 73% growth is impressive no matter how you slice it, it comes on top of 78% growth in the prior-year quarter, which shows that demand for AI infrastructure continues, as enterprises race to adopt this next-generation technology.
It also backs up Palantir’s equally robust results, as its fourth-quarter revenue surged 70% year over year (and 19% quarter over quarter) to $1.4 billion. This drove adjusted EPS of $0.16, which surged 78%.
As impressive as the headline numbers are, they belie the truly phenomenal performance of Palantir’s U.S. commercial segment, including AIP, which really stood out. Segment revenue grew 137% year over year to $507 million, while its customer numbers increased 64%, fueled by record demand for AIP.
It’s also building a solid foundation for future growth, as the segment’s total contract value soared 67% to $1.34 billion. Furthermore, Palantir’s total remaining performance obligation (RPO), or contractually obligated revenue that hasn’t yet been booked, soared 143% to $4.21 billion.
The demand for Nvidia’s industry-leading GPUs, which continue to fly off the shelves, helps showcase the rapid momentum of AI adoption.
The challenge most businesses face is that management lacks the experience and expertise needed to implement something as complex as AI, while also achieving a reasonable return on their investment. Palantir solves that problem by providing the needed expertise and training for executives and developers with its AI “boot camps.”
In all fairness, Palantir’s valuation must be considered. The stock is currently trading for 73 times next year’s expected earnings, though that’s down considerably from its peak. While most would call that egregious, not everyone agrees. Venture capitalist Chamath Palihapitiya argues that Palantir’s offering is so unique that it has no real competition in the market, making its valuation quite reasonable. The truth probably lies somewhere in between.
In either case, if Palantir’s growth continues at its current pace, its valuation might seem cheap five or 10 years from now. Late last year, CEO Alex Karp revealed ambitious plans to 10X revenue, and the company is off to a solid start. At this rate, Palantir could reach its goal sometime over the coming decade.
I’m an unadulterated Palantir bull. For those who don’t want to miss out but haven’t yet bought shares, establishing a small position or employing dollar-cost averaging might be the way to go.
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Danny Vena, CPA has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
