Since its listing in September 2020, data analytics service provider Palantir (PLTR) has seen its stock price surge from $10 per share to approximately $150 currently, becoming a star stock in the artificial intelligence boom. The company primarily provides data mining and analysis services to government agencies and corporate clients. Its explosive growth has benefited from increased contracts with the U.S. government and the expansion of its commercial business. By integrating data from various sources, Palantir helps customers identify trends, predict outcomes, and make more informed decisions.
From 2021 to 2025, Palantir’s revenue tripled, growing from $1.5 billion to $4.5 billion. The company turned profitable in 2023, and its net profit has increased nearly eightfold over the following two years, reaching $1.6 billion. Looking ahead to 2028, analysts project the compound annual growth rates for its revenue and earnings per share to reach 49% and 53% respectively, primarily driven by growth in its U.S. commercial business, new government contracts addressing geopolitical conflicts, and the expansion of its AI platform. Based on these facts, Palantir appears to be a once-in-a-decade investment opportunity in the thriving AI market. However, at the current price of around $150 per share, its valuation has become quite expensive, with a forward price-to-earnings ratio nearing 140 times and a price-to-sales ratio exceeding 50 times.
Despite Palantir’s strong business performance, investors might consider waiting for its valuation to cool down before making a decision. Meanwhile, another popular AI stock with a more reasonable valuation—Broadcom (AVGO)—deserves attention. This diversified chip and software manufacturer may possess greater long-term investment potential than Palantir.
Broadcom’s journey in its current form began in 2016 when Singapore-based chip manufacturer Avago acquired competitor Broadcom and retained the latter’s more recognizable brand name. The combined new Broadcom boasts a wide-ranging business, covering various chips for mobile, data center, networking, wireless, storage, and industrial markets. Furthermore, through the acquisition of several large companies, including CA Technologies, Symantec’s security division, and cloud computing software giant VMware, Broadcom has successfully expanded into the infrastructure software market.
From fiscal year 2021 to fiscal year 2025 (which ended last November), Broadcom’s revenue and adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) achieved compound annual growth rates of 24% and 27%, respectively. In fiscal year 2025, 58% of its revenue came from the semiconductor solutions segment, with the remaining 42% from the infrastructure software business. This unique combination gives Broadcom an edge over other standalone chipmakers or software companies. It can bundle its chips with infrastructure software services, while stable software revenue helps offset the cyclical headwinds faced by the semiconductor business. This structure also reduces its reliance on its largest chip customer, Apple (AAPL), which previously accounted for about one-fifth of its sales before the infrastructure software business expanded.
In fiscal year 2025, Broadcom’s total AI chip sales surged by 65%, reaching $20 billion and accounting for over 31% of its total revenue. This robust growth offset the slowdown in non-AI chip and infrastructure software sales, which were more impacted by macroeconomic factors. By the end of fiscal year 2027, the company aims to achieve annualized AI chip revenue of $6 billion to $9 billion. As its AI chip business expands, analysts project that both Broadcom’s revenue and adjusted EBITDA will grow at a compound annual growth rate of 45% from fiscal year 2025 to fiscal year 2028. In the current volatile market, Broadcom may offer greater upside potential compared to Palantir and other popular AI stocks.
