Key Points
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Palantir just delivered second-quarter results that far outpaced Wall Street’s expectations.
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More broadly, the results show the implementation of AI is ongoing.
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As the leading provider chips used for AI, Nvidia has much to gain from the continued adoption of AI.
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10 stocks we like better than Nvidia ›
The past few years have been something of a blur for Nvidia (NASDAQ: NVDA). The company pioneered the graphics processing units (GPUs) that ushered in the artificial intelligence (AI) revolution. The resulting surge in sales and profits catapulted Nvidia to a $4 trillion market cap, the first company to achieve such a distinction.
Yet some investors are concerned that the hype has outpaced the innovation, and the AI gravy train will inevitably slow. As such, many are looking for signs that businesses are continuing to adopt AI tools and integrate these next-generation algorithms into their operations.
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Palantir Technologies (NASDAQ: PLTR) just delivered the clearest evidence yet that the adoption of AI has reached a tipping point.
Image source: Getty Images.
Blockbuster results
To say that Palantir’s results beat expectations may be an understatement. For the second quarter, revenue of $1 billion surged 48% year over year and 14% quarter over quarter. This fueled adjusted earnings per share (EPS) of $0.16, which soared 78%.
For context, analysts’ consensus estimates called for revenue of $939 million and adjusted EPS of $0.14, so Palantir cleared the already high bar investors had set.
The headline numbers aside, the star of the show was Palantir’s U.S. commercial segment, which includes the company’s flagship Artificial Intelligence Platform (AIP). Revenue for the segment accelerated for the eighth successive quarter to $306 million, up 93% year over year and 20% sequentially. At the same time, the segment’s customer count climbed 64%, as new businesses flock to AIP. This helped drive the segment’s total contract value to $843 million, soaring an impressive 222%.
It’s worth noting that not all the benefits will show up in the current quarter, but rather, the company is setting the stage for future growth. Palantir’s remaining performance obligation (RPO), which represents contractually obligated revenue that hasn’t yet hit sales, surged 77% to $2.42 billion. This provides insight into future growth, and the future looks bright.
Broader implications
Beyond the good news for Palantir investors, the results have much more to say about what’s happening across the AI landscape.
Nvidia CEO Jensen Huang recently predicted that data center spending to support AI would soar 300% to more than $1 trillion by 2028.
Recent revelations by big tech seem to support that view. Each of the “big three” cloud infrastructure providers has revealed plans in recent weeks to increase their 2025 capital expenditures (capex) to support the growing demand for AI among their customers. This generally translates to revenue growth for Nvidia, as its GPUs are the gold standard for AI processing.
More broadly, however, the adoption of AI is moving downstream, as evidenced by Palantir’s accelerating results. In order for enterprise businesses to implement AI internally, they will need the necessary infrastructure (read: AI-capable chips) to power those systems, which also bodes well for Nvidia.
Naysayers continue to suggest the implementation of AI is slowing, despite significant evidence to the contrary. The bottom line is that the adoption of AI continues at a healthy clip.
Nvidia holds a dominant position in the data center GPU market, with a 92% share, according to IoT Analytics. Yet as AI moves beyond the data center, Nvidia stands to benefit from the further proliferation of AI, as its processors are table stakes for both the training and inference of AI models.
The AI revolution has fueled meteoric gains for Nvidia since the advent of AI at the start of 2023, as the stock has soared 1,120% (as of this writing). The stock is currently trading for 31 times next year’s expected earnings, and while some might call that frothy, I would argue that it’s a reasonable price to pay for a company expected to grow revenue by 54% this fiscal year.
Nvidia has established itself as the AI chip leader, and despite the stock’s epic run, the evidence suggests there’s likely more to come.
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Danny Vena 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.
