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The Best AI Stock to Buy Right Now, According to a Wall Street Analyst (Hint: Not Nvidia or Palantir) | The Motley Fool

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  Published in Stocks and Investing on Friday, October 3rd 2025 at 4:17 GMT by The Motley Fool
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Wall Street’s AI Surge: Why NVIDIA and Palantir Are Top Picks for 2025

As the generative‑AI boom enters its second year, investors are scrambling to identify the companies that will reap the most benefit. In a comprehensive analysis published on October 1, 2025, The Motley Fool zeroed in on two firms that appear to be uniquely positioned to capitalize on the wave: NVIDIA Corp. (NVDA) and Palantir Technologies Inc. (PLTR). The piece blends macro‑economic context, company‑specific fundamentals, and forward‑looking valuation metrics to argue that these two stocks represent the best opportunities for the near‑term AI play.

1. The Landscape of AI‑Driven Growth

The article opens with a concise primer on why AI remains a “once‑in‑a‑generation” catalyst. It notes that the market for AI software and hardware is now projected to reach $1.2 trillion by 2030, driven largely by “large‑language‑model” deployments across finance, healthcare, and manufacturing. Wall Street is reacting not only to product sales but also to the “network effects” of data‑intensive AI platforms that lock customers in and raise switching costs. In this environment, the author lists a handful of “broad‑based AI players” – Microsoft, Google, Amazon, and Facebook – but singles out NVIDIA and Palantir as having “the clearest moat and most compelling growth story.”

2. NVIDIA: The GPU Engine of AI

Business Overview
NVIDIA’s core business remains its GPUs, but the company has re‑branded them as the “AI engine” for data centers, autonomous vehicles, and edge computing. The piece underscores that the firm’s data‑center segment now accounts for over $15 billion of revenue, a dramatic increase from the $1.8 billion reported in 2021. The author credits this jump to the explosion of GPU demand for large‑language‑model training, especially after the launch of the “Ampere” and “Hopper” architectures.

Financials & Guidance
The article cites the company’s Q3 2025 earnings, noting a 36% YoY revenue rise and a 23% YoY EPS expansion, both surpassing analyst expectations. In its guidance, NVIDIA projects a $50 billion revenue hit for FY 2026, with an operating margin target of 42%. The writer highlights that the firm is in a “rare position” where it can continue to raise prices without losing market share, owing to a dearth of competitive GPUs.

Risk Factors
While praising NVIDIA’s upside, the piece also flags potential headwinds. The author points to the possibility of a slowdown in AI spending as enterprises become more cost‑conscious post‑pandemic, and the risk of a “chip‑scarcity” crisis that could choke data‑center demand. Additionally, geopolitical tensions between the U.S. and China could restrict NVIDIA’s access to key markets.

Valuation
Using a forward‑looking price‑to‑sales (P/S) multiple of 11.3x, the author argues that the stock is trading at a “discount” relative to the historical mean for AI‑heavy firms. The article concludes that, given the company’s robust cash‑flow generation and high operating leverage, NVIDIA presents a “strong buy” recommendation for investors willing to accept moderate upside volatility.

3. Palantir: The AI‑Driven Data Platform

Business Overview
Palantir is positioned as a “data‑analytics super‑app” that empowers governments and enterprises to make data‑driven decisions. The article explains how the company’s flagship platforms—Palantir Foundry and Palantir Apollo—are now being used to manage supply chains, mitigate risk, and power AI solutions across sectors like defense, finance, and energy.

Financials & Growth
The author cites Palantir’s Q3 2025 results, where revenue grew 32% YoY to $1.18 billion. The “Government” segment accounted for $360 million, a 30% increase, while the “Commercial” segment rose 40% YoY. Palantir’s guidance for FY 2026 projects revenue between $4.7 billion and $5.0 billion, a 60% YoY jump that the author views as “ambitious but plausible” given the company’s current pipeline.

Risk Factors
Palantir’s concentration on government contracts is a double‑edge sword. While the defense budget provides stability, any shift in political priorities could materially affect the company’s top line. The article also cautions that Palantir’s margin profile is still “tight” relative to the wider tech sector, partly due to its high customer‑acquisition costs.

Valuation
The piece notes Palantir’s current price‑to‑earnings (P/E) ratio of 32x, suggesting that the stock trades on a premium to its earnings. However, the author argues that the company’s high growth potential and expanding commercial portfolio justify a more aggressive valuation. A “buy” rating is attached, contingent on a price target of $85 by the end of 2026.

4. Comparing the Two AI Titans

The article concludes by placing NVIDIA and Palantir in a “trade‑off” framework:

The author suggests that “if you’re bullish on the technology side of AI, NVIDIA offers a higher upside potential and lower relative risk.” Conversely, “if you’re leaning toward AI’s enterprise‑software application, Palantir provides a compelling narrative, especially as AI becomes integral to corporate decision‑making.”

5. Additional Resources

Within the article, several hyperlinks provide deeper dives into related topics:

• A link to The Motley Fool’s AI‑Focused Stock Picks page, which lists other high‑growth AI companies such as Microsoft (MSFT), Alphabet (GOOGL), and Adobe (ADBE).
• A reference to a Bloomberg piece on the “chip shortage” affecting the data‑center market.
• A citation of an academic paper on the economic impact of generative AI in manufacturing.

These external resources enrich the article’s narrative, offering readers avenues for further research.

6. Bottom Line

The Motley Fool’s October 1, 2025 article positions NVIDIA and Palantir as the “best AI stocks to buy now” by balancing growth potential with risk considerations. For NVIDIA, the message is clear: its GPU dominance and expanding data‑center revenue set the stage for continued profitability. For Palantir, the story centers on its role as the go‑to platform for data‑driven AI across government and enterprise. Investors who are comfortable with a higher valuation premium and confident in the AI trajectory may find both stocks attractive. Those more risk‑averse might favor NVIDIA for its more stable cash flows, while others could lean into Palantir’s growth narrative.

With AI poised to reshape every industry, the article underscores the importance of staying informed and maintaining a diversified AI exposure. As always, readers are advised to conduct their own due diligence and consult a financial professional before making investment decisions.