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Palantir (NASDAQ: PLTR) and Tesla (NASDAQ: TSLA) are two of the most well liked tech shares available in the market proper now. During the last six months, they’re up 105% and 77% respectively.
Trying forward, each of those firms seem to have large progress potential given their modern AI-related services. Nonetheless, right here’s why I’m not shopping for inventory, or at the least not but.
Palantir’s producing unprecedented progress
Palantir’s now not an organization that may be ignored. On the again of the success of its Synthetic Intelligence Platform (AIP) – which permits personal and public organisations to construct, deploy, and operationalise AI on their very own personal information and techniques – its current progress has been unbelievable.
Final quarter, it reported income of $1bn, up 45% 12 months on 12 months. Within the two quarters previous to this, top-line progress was 39% and 36%, a noteworthy acceleration.
These sorts of numbers recommend the corporate has a very good product. And it makes me suppose that I ought to have some publicity to the enterprise in my portfolio.
The factor is, at current, the corporate has a market-cap of $420bn. That’s fairly excessive on condition that 2025 gross sales are solely forecast to be $4.2bn.
That market-cap places the forward-looking price-to-sales ratio at 100. For reference, AI chip powerhouse Nvidia‘s at the moment buying and selling at about 21.
The issue with that type of triple-digit valuation is that it implies top-line progress’s going to remain very excessive for some time. And issues might not play out this fashion.
What if company AI spending slows somewhat and Palantir’s top-line progress is barely 25%? On this situation, I’d count on the inventory to fall sharply as traders reset their expectations.
Given the excessive price-to-sales a number of, this inventory’s staying on my watchlist for now. I can see myself proudly owning it at some stage, however I’m not prepared to tug the set off but.
Tesla has enormous potential
Turning to Tesla, it’s not experiencing the identical type of progress as Palantir. This 12 months, revenues are literally projected to fall 12 months on 12 months.
Taking a long-term view nonetheless, the long run seems thrilling. Not solely is the corporate more likely to be a significant participant in autonomous autos (it already has robotaxis on the street within the US), nevertheless it additionally seems set to be a giant participant in humanoid robotics (because of its ‘Optimus’ robots).
Zooming in on the humanoid robotics aspect of the enterprise, this seems to have appreciable potential. In line with analysts at Citi International Insights, the marketplace for humanoids may very well be value $7trn by 2050.
Now, the price-to-sales ratio right here doesn’t look loopy. At present, it’s about 15.
The metric that’s problematic for me nonetheless, is the price-to-earnings (P/E) ratio. At present, this stands at about 250 (versus 39 for Nvidia).
For a well-established firm with a few years of profitability, that’s a very excessive a number of. To my thoughts, it simply doesn’t match the basics, regardless of the expansion potential right here.
Proper now, Tesla’s buying and selling prefer it’s going to personal each the autonomous driving and humanoid robotics markets. That is unlikely to be the case although because it seems set to face intense competitors in each.
So like Palantir, this inventory’s staying on my watchlist for now. If the valuation comes all the way down to a extra affordable stage, I’ll take into account it for my portfolio.
