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

Palantir Technologies (PLTR -0.83%) has been one of the market’s best-performing stocks over the past two years, largely thanks to growing demand for its Artificial Intelligence Platform (AIP). Instead of trying to develop another large language model (LLM), Palantir’s platform was developed to make AI models more useful. It pulls together data from multiple sources, organizes it, and ties it to real-world assets. This clean data helps reduce AI hallucinations and makes it more actionable. In essence, AIP has become akin to an AI operating system.

The company is growing fast, with revenue jumping 48% year over year last quarter to hit $1 billion. U.S. commercial sales nearly doubled, while U.S. government revenue climbed more than 50%. Customers are spending more, too, with net dollar retention at 128%, which indicates the platform is sticky and becoming more valuable over time.

Image source: Getty Images.

Palantir’s execution and future opportunities are not the issue for investors; valuation is. The stock trades at a forward price-to-sales (P/S) multiple of over 100 times 2025 analyst estimates. Note that this is sales, not earnings, we are talking about. When a stock is priced like this, even the smallest miss on growth can hit shares hard.

I like the company, but that kind of multiple doesn’t leave much room for error, and there are other tech names that give you strong potential upside without paying such a premium. Let’s look at two to consider.

Alphabet

Alphabet (GOOGL 0.28%) (GOOG 0.21%) is one of the best-positioned companies for AI because it already controls the front door to the internet for billions of people. Most of us already use Google search every day, and sometimes we may not even realize it, because it is the default search engine on most Android and Apple devices.

So while AI is changing the landscape, Alphabet’s advantage is that it doesn’t need to change consumer behavior, it just needs to make those products better with AI. That’s exactly what it is doing with its new AI-powered search features, including AI Overviews, Lens, and Circle to Search. It is also just starting to roll out its new AI mode globally, which is more akin to a traditional AI chatbot. However, users can easily toggle between AI and search modes without having to switch apps. At the same time, its Gemini app recently became the most downloaded app on the Apple App Store, surpassing ChatGPT, showing the strides the company has made in this area.

Alphabet is also building one of the best cloud computing businesses on the planet. It is one of the few companies that owns the complete stack, with its own AI model, custom AI chips, leading data analytics and software, and even its own private fiber network. Its Waymo robotaxi also has huge growth potential as it rapidly expands across the U.S., and it even has made strides in quantum computing with its Willow chip.

The stock hasn’t run nearly as far as some of the other AI plays, so you aren’t paying up in the same premium as you are with Palantir.

GitLab

GitLab (GTLB 1.67%) is an underrated way to play the growth in AI-driven software development, but don’t be mistaken: This is a high-growth company. In fact, it’s grown its revenue by between 25% and 35% for eight straight quarters.

What started as a DevSecOps platform is now a full software development lifecycle solution that is helping developers save time. The company has leaned into AI with its Duo AI agent, which helps automate repetitive tasks, freeing up more time for developers to code. This matters because developers only spend around 20% of their time coding, so any tool that frees them up to write more code is going to drive productivity, and thus demand for its solution.

AI hasn’t hurt GitLab; if anything, it has sped up the pace of software development, which benefits the company. If you look at the growth of cloud computing, much of that is around AI software development, which lands right in GitLab’s wheelhouse. The company is partnered with both Google Cloud and Amazon Web Services (AWS), so it is benefiting from this growth. Enterprise clients are spending more, and its customers are also moving up to higher-tier plans.

What is most exciting about the GitLab story, though, is its shift to a hybrid seat-plus-usage pricing model. The usage component helps protect the company if AI eventually does lead to fewer coders, while at the same time giving it more growth potential. For investors looking for an AI play that is still reasonably priced with a long runway of growth, GitLab is worth a close look.