It has been a wild start to 2026 for many software and technology stocks. As investors consider the disruptive potential of artificial intelligence (AI), many tech stocks have taken a beating. Shares of data analytics specialist Palantir(NASDAQ: PLTR) and e-commerce and cloud computing giant Amazon(NASDAQ: AMZN) have both been slammed, falling about 15% and 10% year to date, respectively.
Despite the recent pessimism, both companies just reported exceptional quarterly results and continue to benefit heavily from AI adoption. But is one of these AI stocks a better place to deploy capital today?
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Palantir’s underlying business is undeniably firing on all cylinders. Its fourth-quarter revenue skyrocketed 70% year over year, marking an impressive acceleration — up from 63% growth in Q3 and 48% growth in Q2.
And what’s particularly staggering is the company’s outlook. The midpoint of management’s guidance implies that revenue growth could accelerate again in the first quarter of 2026. Palantir guided for first-quarter revenue to be between $1.532 billion and $1.536 billion. The midpoint of this guidance range implies a year-over-year growth rate of about 74%.
The company’s bottom-line performance is particularly impressive. Palantir’s net income in 2025 rose more than 250% year over year to $1.625 billion.
But just because a business is executing flawlessly doesn’t mean its stock is a buy. At a market capitalization of more than $360 billion, Palantir trades at about 240 times its trailing-12-month earnings.
A valuation like this is priced for perfection, leaving essentially no room for error.
And there are early signs that a slowdown could be on the horizon. The company’s total contract value closed at $4.3 billion in the fourth quarter. While this was up 138% year over year, it represented a notable deceleration from 151% growth in the prior quarter. If this metric continues to slow throughout 2026, it could eventually signal softer top-line growth ahead.
Amazon is also seeing a meaningful and accelerating tailwind from AI.
The company’s fourth-quarter net sales increased 14% year over year to about $213 billion. And Amazon‘s growth in Amazon Web Services (AWS), the company’s highly profitable cloud computing arm, is stepping up. AWS revenue rose 24% year over year to $35.6 billion in the quarter — an acceleration from 20% growth in the prior period.
Amazon’s management attributes this directly to massive demand from customers wanting to run more AI workloads.
And the company’s AI opportunity extends to its custom silicon solutions as well. Combining its Trainium and Graviton chips, Amazon has built a chip business boasting more than $10 billion in revenue on an annualized run rate basis. In fact, management disclosed in the company’s fourth-quarter update that its chips business is growing at a triple-digit rate.
To capture this opportunity, Amazon is putting its pedal to the metal, committing to about $200 billion in capital expenditures in 2026.
Both Palantir and Amazon offer investors a way to bet on the continued expansion of artificial intelligence. But Amazon offers investors a way to buy into the AI boom without taking on as much risk.
To justify its valuation, Palantir has to maintain staggering top-line growth and near-perfect execution for years. Amazon, on the other hand, trades at a much more reasonable price-to-earnings ratio of about 29. At this valuation, investors get a dominant, sprawling e-commerce operation and an accelerating, scaled cloud business.
Of course, there are risks to Amazon’s strategy. The company’s $200 billion capital expenditure plan, for instance, could weigh on margins if the payoff from AI spending takes longer than expected.
Overall, however, the risk-reward trade-off for Amazon stock looks far less risky (and more compelling) than it does for Palantir.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Palantir Technologies. The Motley Fool has a disclosure policy.
