Should You Forget Palantir and Buy These 2 Tech Stocks Instead?

Palantir Technologies (NASDAQ: PLTR) has become one of the best performing stocks in the market this year, up more than 340% year to date as of this writing. However, the stock's strong performance has also left it with one of the most hefty valuations in the space.

The stock now trades at an astronomical forward price-to-sales ratio (P/S) of about 49.5 times next year's analyst estimates, while taking out its net cash position drops it to about 49.2 on an enterprise-value-to-sales multiple (EV/S).

By comparison, at the height of software-as-a-service (SaaS) valuations, SaaS stocks traded at an EV/S multiple of 20 times with growth more than 30%. Palantir grew its revenue 30% last quarter.

The data analytics company established itself through its work with the U.S. government, where its platform helped perform mission critical tasks such as fighting terrorism and tracking COVID cases.

More recently, Palantir has been gaining strong momentum with its AI offering in the commercial space while its government business has also picked up. However, the company's valuation has become pretty extreme, and even its top executives have been aggressively selling the stock the past few months, including its CEO and chairman.

Let's look at two other fast-growing companies whose stocks trade at much lower valuations that could be alternatives to consider.

1. Nvidia

Like Palantir, Nvidia (NASDAQ: NVDA) has been a big winner this year, up about 190% year to date as of this writing. The company has also been growing its revenue quickly, including 94% last quarter.

Its stock trades at a forward price-to-earnings ratio (P/E) of about 32.6 based on 2025 analyst estimates. That's quite a difference in valuation, as Nvidia's forward P/E is lower than Palantir's forward P/S ratio, so this is comparing earnings versus sales. Nvidia is growing revenue faster to boot.

Meanwhile, Nvidia is poised to keep benefiting from the ongoing artificial intelligence (AI) infrastructure build-out. Large tech companies continue to pour money into data centers to run AI applications and train large language models (LLMs). This is where Nvidia comes in, with its graphic processing units (GPUs) that have become the backbone of the computing power on which these AI models are being trained.

And in order for AI models to advance and become more sophisticated, they need exponentially more computing power on which to be trained. For example, the next-generation AI models from both Alphabet and Elon Musk-backed xAI are using 10 times as many GPUs for training than their prior versions. If companies are going to continue to race to create the best AI models, then Nvidia is going to continue to see a lot more demand for its GPUs.

At the same time, the company also has a wide moat in the GPU space, since it long ago created a software platform to program its chips, which became the standard thereafter for developers learning to program GPUs. This has helped Nvidia garner an approximately 90% market share in the space. Taken altogether, Nvidia remains a solid stock option at current levels.

Image source: Getty Images

2. GitLab

GitLab (NASDAQ: GTLB) runs a DevSecOps platform, which helps software development while also integrating cybersecurity into all stages of the process. Last quarter, the company grew its revenue at a slightly quicker pace than Palantir, at 31%. It also has outstanding 89% gross margins.

The company's growth is being powered by its GitLab Duo, which is its suite of AI-powered tools that help developers write code with suggestions and automation. This is an add-on to its Ultimate and Premier platforms, and it is currently being attached to many new deals.

GitLab has not only been seeing solid customer growth, but it has also been strongly growing within its existing customer base, with net revenue retention of 124%.

The company has consistently grown its revenue by anywhere from 30% to 40% over the past six quarters, showing its strong consistent sales gains. Meanwhile, it just recently announced a deal with Amazon Q to let developers create and deploy secure code faster on AWS for AWS customers using GitLab Ultimate. It also is working on getting a designation to be able to go after federal government business.

GitLab helps organizations quicken their software development and save money, which is a great combination. In fact, a Forrester Research study said that organizations using GitLab Ultimate saw a 482% return on investment over three years. This, together with its partnership with Amazon and AI add-ons, should continue to drive strong revenue growth.

Meanwhile, the stock trades at a forward P/S of 11.5, which is a huge discount to the 49.5 multiple of Palantir, while growing revenue at the same pace. This makes GitLab an attractive cheaper alternative to consider.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, GitLab, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.