The AI boom is nearly 3 years old, and one thing is certain about it: the boom has legs, and AI is here to stay. More and more companies are turning to the technology to enhance all sorts of functions, from customer service to chatbots to high-level data analytics and even to decision-making processes. According to Fortune Business Insights, up to 35% of all businesses have integrated AI into their work models.

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This equals big money for the AI developers out there. Chip makers, AI app creators, data analysis firms – all of these and more have created an industry that was valued at $233 billion last year, and is estimated by Fortune Business Insights to hit $294 billion this year – and to show a CAGR of 29.2% through 2032, reaching $1.77 trillion that year. We should note that North American AI companies, mainly in the US, are leading this industry, with a 2024 market share of nearly 33%.

With numbers like these, it’s no surprise that UBS analysts are combing through the sector to pinpoint the most promising AI stocks. Their latest deep dive zeroes in on two recent earnings reporters – Palantir (NASDAQ:PLTR) and Advanced Micro Devices (NASDAQ:AMD) – to see which is the superior AI stock to buy. Let’s take a closer look.

Palantir

The first AI stock we’ll look at here is one of the leaders in the field. Palantir is well-known for marrying AI technology and capabilities to the field of data analysis, a match that has matured into a solid product platform – AIP, or AI Platform – and a set of tools whose wide applicability has made them highly popular. Since its founding in 2003, Palantir has developed a reputation for innovation, and has built itself into a $441 billion giant of the AI industry.

Palantir’s AIP is purpose-built to combine AI tech with human intuition and flexibility, to gain the best from both – and to improve outcomes and results in data analysis. The products also use AI technology to improve the user interface, making it easy to use and simple to understand. The AI reads and responds in real text, based on natural language models; in practice, Palantir’s users don’t need to learn machine language or computer coding to communicate with the AI – they can simply enter their requests in clear text and receive responses the same way. The technology is also amenable to real-time translations, making Palantir’s products easy to market internationally – the system just needs to be told what language it is using, and its translation algorithms handle the rest.

The company’s products and capabilities have proven particularly popular in government use, especially in the Department of Defense. This is clear from the company’s frequent announcements of new projects; DoD contracts and partnerships are regularly featured. Two examples: in July, Palantir announced that it had entered into a joint program, Warp Speed for Warships, with BlueForge Alliance, to accelerate warship production, fleet readiness, and digital transformation for the US Navy. And in June, the company launched a strategic partnership with Accenture, for the deployment of commercial-grade, AI-powered solutions designed to meet the high-priority operational challenges across a wide range of Federal agencies.

In its last quarterly report, covering 2Q25, the company announced a series of strong gains in key metrics. The company’s customer count was up 43% year-over-year, providing a base that supported a 48% YoY jump in revenue, to $1.004 billion – marking Palantir’s first billion-dollar quarter and beating the forecast by $60.5 million. At the bottom line, Palantir realized non-GAAP earnings of 16 cents per share, 2 cents per share better than had been expected. The company’s quarterly adjusted free cash flow came to $569 million, which represented a margin of 57%. And the company finished the quarter with cash and liquid assets totaling $6 billion.

About the only thing that has grown faster than Palantir’s financial markers was the company’s share price. Year-to-date, shares in Palantir have far outpaced the broader markets. PLTR trades on the NASDAQ, which is up 11% so far this year, and it is a component of the S&P 500 index, which is up 9%; at the same time, for the year-to-date, PLTR has gained an impressive 147%. For the past three years, the stock’s gain is over 1,849%.

Covering Palantir for UBS, 5-star analyst Karl Keirstead notes the company’s strong performance, yet he finds it impossible to ignore its high valuation. He writes, “Palantir reported its 8th straight quarter of revs growth acceleration, a turnaround that we’ve never seen before, from 13% growth in 2Q23 to a 2Q25 growth rate of 48%, while at a $4 billion revs scale. Palantir raised the full year 2025 total growth guidance to 45% from 36%, without compromising on the non-GAAP margin target, which was inched up to 46%. Palantir is benefiting from a confluence of mega-trends in AI application development, investments at the data layer and the modernization of defense tech, but valuation at 136x CY26E FCF remains our key hurdle…”

That hurdle leads Keirstead to rate PLTR as Neutral (i.e., Hold). His price target on the stock is $165, implying a one-year downside of ~12%. (To watch Keirstead’s track record, click here)

The Street generally would seem to agree with the UBS view. PLTR has a Hold consensus rating, based on 19 recent analyst reviews that include 4 to Buy, 13 to Hold, and 2 to Sell. The shares are priced at $186.96 and have an average price target of $152.12, suggesting that the share price will fall by ~19% in the next 12 months. (See PLTR stock forecast)

Advanced Micro Devices

Next up on the AI stage is AMD, a fast-rising contender steadily climbing the semiconductor ranks with a solid growth streak. It may not yet belong to the trillion-dollar club alongside Nvidia, Broadcom, and TSMC, but with a market cap near $280 billion, AMD is far from a lightweight. Over the past four quarters, it has pulled in roughly $30 billion in revenue, powered by a diverse portfolio spanning PCs, gaming rigs, and the surging AI/data-center market. Here, AMD isn’t merely keeping pace – it’s going toe-to-toe with Nvidia in AI accelerators and challenging Intel in PC microprocessors.

That competitive edge has been sharpened in recent years as AMD shifted from its roots in PCs and gaming toward a bigger slice of the AI pie. The company now offers a broad lineup of AI solutions across CPUs, GPUs, and adaptive computing, with the flexibility to tailor products for specific customer needs – whether in data centers, at the edge, or in enterprise applications. This diversification isn’t just theoretical; it’s showing up in high-profile wins and an expanding product pipeline.

In June, AMD landed Nokia as a customer for its 5th generation EPYC processors, which will power the Nokia Cloud Platform – a deal that underscores the broad applicability of its technology. Just a month earlier, AMD unveiled new high-performance computing products, including the Radeon RX 9060 XT and Radeon AI PRO R9700 graphics cards, plus the Ryzen Threadripper 9000 Series processors, targeting growth in gaming, content creation, and AI workloads.

In 2Q25, AMD reported gains in both AI-related and gaming sales, with AI/data center sales climbing 14% YoY to $3.2 billion and gaming revenue surging 73% to $1.1 billion. Client revenue hit a record $2.5 billion, up 67% vs. the previous year, helping overall revenue climb 32% to $7.685 billion, thereby beating the estimates by $260 million. Non-GAAP EPS came in at 48 cents, in line with expectations, while cash on hand totaled $4.44 billion. For Q3, AMD anticipates revenue of ~$8.7 billion, with a possible variation of $300 million, compared to the $8.32 billion consensus estimate.

That performance has caught the eye of UBS’s Timothy Arcuri, an analyst who ranks in 6th spot amongst the thousands of Street stock experts, who sees reasons for both caution and optimism.

“AMD beat (on revenue) and guided above, but only to about where investor expectations were into the print. The bear would say that the beat was largely gaming-driven and while data center GPU is seeing a strong inflection in 2H, this was already baked into expectations and AMD did not raise the full year outlook for data center GPU despite all of the hyperscaler capex increases. In the very near-term, this may carry the day, but we think the path of travel for the business – and ultimately the stock – remains in a positive direction.”

Laying out a supporting case for buying in, the 5-star analyst goes on to say, “First, excluding China, AMD’s data center GPU business is growing at a rate roughly similar to NVDA in C2H:25… Second, the outlook for market share growth in both the server and desktop portion of the CPU business is very strong with INTC’s roadmap under duress – combined, these are ~35% of AMD’s revenue and accretive to margins. Third, we would like to see gross margin inflecting quicker, but the underlying trends are still up and to the right with AMD able to at least hold GM flat even in CQ3 where the mix is unfavorable.”

That conviction earned AMD a Buy rating from Arcuri, who set a $210 price target – pointing to a potential 21.5% gain over the next year. (To watch Arcuri’s track record, click here)

Overall, AMD boasts a Moderate Buy consensus rating from the Street, based on 37 analyst reviews that break down to 25 Buys and 12 Holds. The stock’s current trading price of $172.76 is slightly below the $180.78 average target price, implying a modest one-year upside of ~5%. (See AMD stock forecast)

To find good ideas for AI stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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