There are 10 companies with a market cap over $1 trillion right now, and all of these except one are involved in artificial intelligence (AI). This technology will drive a substantial amount of economic growth in the 21st century, providing investors the chance to earn substantial gains from the right stocks.

Some companies that are well positioned to play a key role in shaping the economy with AI are still valued at less than $1 trillion. Although their share prices could be volatile in the near term, the following two companies could be worth a lot more down the road they are today.

1. Palantir Technologies

More than 800 companies have chosen Palantir Technologies (PLTR 4.14%) to transform their business operations with AI. Businesses can upload data on Palantir’s platforms, and it basically shows them how to be more efficient, grow their revenue, and become more profitable. It is working magic for businesses and the U.S. military, which trusts Palantir to keep top-secret information secure about the U.S. and its allies. Despite its already high market cap of $400 billion, Palantir’s unique value proposition and stellar profitability has all the makings of a $1 trillion business.

Palantir is not just slapping a large language model on a company’s data to make it easy to search information. It pulls together data from different sources within a company, which creates a framework for understanding how the company operates. Palantir is essentially building a digital copy of a company’s operations that can detect problems and solve those problems instantly.

Palantir’s financials suggest there is no replacement for the value it provides. It reported accelerating revenue growth over the last year. In the second quarter, revenue grew 48% year over year, compared to 27% in the year-ago quarter.

Moreover, its net income margin was stellar at 33% in Q2, with an adjusted free cash flow margin of 57%. It’s not common for a small software company in the early stages of growth to be reporting margins like Microsoft.

These margins are being driven by high prices that Palantir charges customers. For example, it recently secured a $10 billion contract with the U.S. Army for the next decade. Organizations are willing to pay up for Palantir’s software because the savings realized are that big. Palantir is saving enterprises millions, even hundreds of millions in costs in some cases, providing an attractive return on investment that is driving the company’s growth.

Palantir stock is expensive, trading at high multiples of sales and earnings. But this is a unique software company with a huge opportunity ahead. CEO Alex Karp is aiming to grow revenue by 10x over time, which would bring annual revenue to more than $40 billion from this year’s analyst estimate of $4.1 billion. Based on its current margins, that could equate to $20 billion in annual free cash flow over the long term. Applying a high-growth multiple of 50 to that would put the stock’s market cap at $1 trillion.

2. Advanced Micro Devices

For AI to keep advancing and transform how people work and communicate, it needs more powerful chips. Nvidia has been the biggest winner so far, but investors shouldn’t overlook Advanced Micro Devices (AMD 1.91%). It is the second-leading supplier of graphics processing units (GPUs), and it could be well positioned to meet growing demand in edge computing and AI inferencing that could send the stock from its current $250 billion market cap to $1 trillion.

As AI proliferates across the economy, people will be able to use powerful AI applications and processing on their devices, which makes edge computing a large opportunity for AMD. The company offers a range of high-performance and energy-efficient chips that are aimed at running AI devices and PCs, positioning it to benefit from a booming market estimated to be worth $327 billion by 2033, according to Grand View Research.

Investors were disappointed by the company’s Q2 data center growth of 14% year over year, but management expects stronger demand once it launches its Instinct MI350 series of GPUs. As it continues to bring new solutions to the data center market, AMD’s data center business should accelerate.

AMD’s chips are clearly addressing needs in the AI market. It announced a partnership with Saudi Arabia’s Humain to build AI infrastructure using AMD’s GPUs and software. Meanwhile, Oracle is building a massive AI compute cluster using multiple AMD chips. AMD says it is also working with governments globally to build sovereign AI infrastructure.

Analysts expect AMD‘s earnings to grow at an annualized rate of 30% over the next several years. Against those prospects, the stock trades at a reasonable forward price-to-earnings multiple of 40. There is enough earnings growth here to potentially triple the stock in five years, putting it easily within striking distance of reaching $1 trillion within the next decade.

Kazakhstan has announced the creation of a Ministry of Artificial Intelligence (AI) and a systemic shift towards a digital state, set to be realised within the next three years. President Kassym-Jomart Tokayev outlined a comprehensive reform plan, highlighting AI as the central driver for transformation across all sectors, from government administration and industry to agriculture and education.

The initiative includes the integration of a digital tenge into the budgetary system. This is reported by the
official website of Kazakhstan’s president.

A key component of this new development phase is the creation of a Digital Code, designed to standardise regulations surrounding technologies, digital platforms, data, and AI.

The Code will serve as the foundational legal framework for both business and government. The establishment of the Ministry of Artificial Intelligence and Digital Development is an institutional step.

AI integration will encompass all spheres, from the economy and industry to public administration and the social sector. Government services are slated to transition to intelligent platforms, while businesses will be encouraged to adopt digital technologies to enhance productivity and competitiveness.

The initiative includes a social component with the launch of the programme, focused on educating students and schoolchildren in the fundamentals of artificial intelligence. Plans are also in place to introduce AI as a separate subject in school curricula for the first time.

Photo: Myvector /
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Shares of Palantir Technologies (PLTR 4.14%) have returned 2,570% since the artificial intelligence (AI) boom began in earnest in January 2023. Arm Holdings (ARM -2.62%) did not go public until September 2023, but shares have since advanced 195%. Those gains have left both stocks trading at rich valuations, so much so that certain Wall Street analysts recommend selling.

• Rishi Jaluria at RBC Capital has set a target price of $45 per share for Palantir. That implies 73% downside from its current share price of $171.
• Javier Correonero at Morningstar has set a target price of $80 per share for Arm. That implies 46% downside from its current share price of $150.

Here’s what investors should know about these popular AI stocks.

Palantir Technologies: 73% implied downside

Palantir introduced its Artificial Intelligence Platform (AIP) in April 2023. It serves as a large language model organization tool that complements its core data analytics platforms by letting developers integrate generative AI into applications and workflows. The product has been an unmitigated success, such that sales growth has accelerated in eight consecutive quarters.

Palantir’s advantage lies in its unique ontology-based software architecture. In this context, an ontology is a framework that integrates an organization’s data, assets, and actions into a digital twin that supports decision-making. It also captures the outcome of every decision and feeds the information back into the models, which creates a feedback loop that leads to better insights over time.

International Data Corp. ranked Palantir as the market leader in decision intelligence platforms last year. That bodes well for the company. Grand View Research estimates that data analytics software sales will increase at 29% annually through 2030. “The main factors propelling the data analytics industry expansion are the growing adoption of machine learning and artificial intelligence,” according to the report.

However, Palantir is one of the most richly valued software stocks in history. It currently trades at 126 times sales, which makes it the most expensive stock in the S&P 500 by a long shot. The second-most expensive stock is Texas Pacific Land at 29 times sales. That means Palantir would still be the most expensive stock in the index even if it lost 75% of its value.

In that context, it is entirely plausible that Palantir will suffer a major meltdown at some point in the future. Prospective investors should avoid the stock or, at the very least, keep any positions very small. Current shareholders with a substantial percentage of their portfolios invested in Palantir should consider trimming their positions.

Arm Holdings: 46% implied downside

Arm has long dominated the market for mobile device processors due to its power-efficient architecture. Its central processing units (CPUs) are found in 99% of smartphones. But that quality, coupled with the flexibility of its licensing model — Arm does not make chips, but rather licenses blueprints to customers who develop custom chips — has also helped it gain market share in data centers.

Major technology companies, such as Alphabet, Amazon, Apple, and Microsoft, have designed Arm-based server processors. And Nvidia‘s Grace Blackwell Superchip pairs two Blackwell GPUs with an Arm-based Grace CPU. In total, Arm has added about 10 percentage points of market share in data centers in the last two years, while Intel has lost about 16 points. AMD has also gained share, which accounts for the difference.

That trend is likely to continue as companies look to curb operating costs associated with AI infrastructure by deploying more power-efficient server processors. CEO Rene Hass recently said AI is “driving unprecedented demand for compute that’s not only performant, but also energy efficient. And Arm is the only compute platform built to deliver.”

However, Arm currently trades at 94 times adjusted earnings. That is particularly expensive for a company whose earnings are forecasted to increase at 23% annually through fiscal 2027. Those figures give Arm a price/earnings-to-growth (PEG) ratio above 4, which is traditionally seen as overvalued. Moreover, Arm trades at 39 times sales, which makes it the third-most expensive stock in the Nasdaq-100, behind Palantir and Strategy.

I doubt Arm shares will decline 46% unless the broader market drops sharply, but the stock is very expensive. Investors should wait for a better entry point before putting money into this semiconductor company. Personally, I would feel more comfortable buying at $120 per share, though the valuation would still be stretched even at that price.