Palantir (PLTR 1.43%) has gained a reputation for being one of the best artificial intelligence (AI) investments, which is why the stock has risen nearly 300% since the start of 2024. However, some major assumptions have caused Palantir's stock price to swell so much since then.
Right now, Palantir is roughly a $150 billion company, but I think some other AI stocks could surpass it by the end of 2025. The two candidates are Snowflake (SNOW 0.60%) and CrowdStrike (CRWD 1.93%). Why these two? It all has to do with valuation.
Palantir has less revenue than competitors
Palantir and its AI software, which gives clients the tools they need to help with decision making, has become a popular AI program. However, Palantir's growth hasn't been remarkable. In the third quarter, Palantir's revenue rose 30% year over year. While that's strong, it's nearly identical to what Snowflake and CrowdStrike put up.
Snowflake reported 28% revenue growth for the third quarter of fiscal 2025 ending October 31, powered by its data cloud software platform that is necessary to store and provide data to AI models. CrowdStrike is a cybersecurity provider that uses AI to help determine what a threat is and what is normal activity. It delivered 29% growth in the same period. While Palantir technically edged them out in this category, it's close enough that a true winner cannot be established.
However, when you look at the revenue each company generated during the quarter, it's clear Palantir is last in this trio.
PLTR Revenue (Quarterly) data by YCharts.
Snowflake and CrowdStrike clearly have the edge over Palantir in total revenue, so conventional wisdom would say that if these three are growing at the same pace, they should be valued similarly. But that's not the case, as they are valued at wildly different levels.
PLTR Market Cap data by YCharts.
The market has given Palantir a massive premium over its peers, trading for an unbelievable 61 times sales at the time of writing. This is why Palantir's market cap is so much larger than its peers. But that price tag isn't normal, especially for Palantir's growth level.
Back in 2021, CrowdStrike and Snowflake traded for similar valuations to Palantir's now. Snowflake actually traded around 100 times sales, while CrowdStrike was in the 50s. The key difference was CrowdStrike's revenue was growing at 70% year over year, while Snowflake's was growing at 110%.
This should be an obvious red flag for Palantir investors, as it's unlikely Palantir will be able to maintain that valuation if its growth doesn't accelerate. Still, there are some key reasons why Palantir is better off than CrowdStrike or Snowflake.
Palantir's growth is expected to slow this year
One key advantage Palantir has over the other two is its profitability. Palantir is solidly profitable and has been so for some time. The other two haven't seen near the profitability levels Palantir has.
SNOW Profit Margin (Quarterly) data by YCharts.
This certainly gives Palantir an edge, but it's far from enough to justify the expensive price tag on its stock. I believe there's a significant drop coming in the stock, sending it back to levels similar to those of CrowdStrike and Snowflake. The growth isn't justifying the stock price unless 2025 has massive growth in store for Palantir.
For 2025 (or fiscal year 2026 for CrowdStrike and Snowflake), Wall Street expects these levels of growth for each company:
| Company | 2025 or FY 2026 Revenue Growth |
|---|---|
| Palantir | 25% |
| CrowdStrike | 22% |
| Snowflake | 23% |
Data source: Yahoo! Finance.
While Palantir's growth rate is expected to top its peers, it's still not nearly as fast as what we saw in 2021 when the other two traded around the same valuation as Palantir does now. Even though both Snowflake and CrowdStrike continued their rapid growth rates in 2022, each stock crashed significantly, with Snowflake and CrowdStrike falling 58% and 49%, respectively.
I wouldn't rule out a similar scenario for Palantir in 2025, and the cookie has already started to crumble as the stock has fallen more than 10% to start 2025. If Palantir returns to the same valuation level as CrowdStrike and Snowflake, both of these companies will be larger by market cap due to their higher revenue levels. I wouldn't be surprised if that happened in 2025, and if I were a Palantir shareholder, I'd consider moving on from this AI stock.
