Over the past three years, there’s been no buzzier topic on Wall Street than the growth of Artificial Intelligence (AI). Empowering software and systems to take rapid decisions autonomously has revolutionized numerous industries worldwide.
Among numerous companies that have thrived due to AI advancements, none stand out quite as prominently as Nvidia (NVDA), a leading graphics processing unit company, and Palantir Technologies (PLTR), a data-mining specialist driven by AI. Notably, since the beginning of 2023, Nvidia’s market value has soared beyond $3.8 trillion, while Palantir’s stock price has skyrocketed approximately 2,250% over the same period.
Nvidia and Palantir may be in a bubble
Nvidia is well-known for its Hopper and Blackwell graphics processing units (GPUs), which make up the majority of GPUs used in AI-enhanced data centers at present. Due to ongoing shortages of AI-compatible GPUs, Nvidia has been able to maintain a significant order backlog for their hardware, enabling them to consistently charge prices that are more than 100% higher than those of their competitors in the market.
Currently, Palantir thrives on the success of its two AI-driven systems, Gotham and Foundry. These platforms are indispensable for large-scale use, with governments at all levels depending on Gotham for military strategy development and execution, as well as data analysis. Meanwhile, Foundry aids businesses in understanding their data and optimizing their operations. It’s worth noting that Gotham has significantly contributed to Palantir’s continued sales growth and transitioning the company towards recurring profitability.
It’s important to note that while they have achieved remarkable achievements, it’s plausible that Nvidia and Palantir could be overvalued, given current market conditions.
To begin with, over the past three decades, most groundbreaking innovations have experienced a rough start involving a bursting “bubble” early on. These technologies need time to grow and develop, and currently, many businesses implementing AI solutions are still far from fully optimizing them. If an AI market bubble were to form and pop, it’s likely that Nvidia and Palantir would be among the companies most affected by this downturn.
The valuations of these companies could be a significant issue to consider. While most pioneering tech companies in their sector have reached price-to-sales (P/S) ratios between 30 and 40, Palantir is close to an astonishing P/S ratio of 121! Nvidia, on the other hand, is quickly approaching a P/S ratio of 29, which is more than double the trailing-12-month P/S multiple of any of its peer group members, known as the “Magnificent Seven”.
Should history repeat itself and the AI sector experiences a downturn, there could be a golden opportunity for lesser-known brands to outpace giants like Nvidia ($4.18 trillion) and Palantir ($356 billion) in terms of valuation by 2035. Here are three promising stocks currently undervalued compared to both Nvidia and Palantir, which I believe could overtake them in the coming decade:
1. Stock A: With a current market cap significantly lower than both Nvidia and Palantir, this up-and-coming AI player boasts cutting-edge technology that has caught the attention of industry leaders.
2. Stock B: This under-the-radar company specializes in AI applications for various sectors, offering a unique value proposition that could drive its valuation skyward over the next decade.
3. Stock C: Despite being relatively unknown today, this innovative AI solutions provider has shown impressive growth potential and could become a major player in the AI market by 2035.
Alibaba Group: current market cap of $276 billion
Among the potential contenders poised to surpass Nvidia and Palantir is the Alibaba Group, a China-based powerhouse in e-commerce and AI, with a market cap just $80 billion shy of Palantir’s but a significant $3.9 trillion lower than Nvidia’s.
As an observer, I note that the core operating segment of Alibaba lies within its e-commerce marketplace. According to a DBS Treasures report, Alibaba’s platforms Taobao and Tmall are estimated to account for approximately 41% of China’s online retail platform gross merchandise value in the year 2024. Despite relatively low profit margins associated with online retail sales, China’s expanding middle class creates a promising landscape for sustained growth within Alibaba’s e-commerce sector.
Instead of just focusing on Alibaba’s online retail sales potential, it’s equally fascinating to explore its cloud infrastructure services and artificial intelligence connections. As reported by Canalys, Alibaba Cloud accounted for a third of all spending on cloud infrastructure services in mainland China during the quarter ending in March. Moreover, integrating advanced AI solutions could significantly boost or maintain a high growth rate in this higher-profit segment, potentially even exceeding 10%.
Let’s not forget to mention Alibaba’s robust financial report as well. By the end of March, they had amassed $59 billion in cash, short-term investments, cash equivalents, and equity securities. This figure, combined with a net cash inflow of about $3.8 billion from their operations in the first quarter of the year, explains why Alibaba is able to maintain a share buyback program and invest heavily in various high-growth and high-margin innovations. It’s not surprising at all!
PayPal Holdings: current market cap of $71 billion
Another extraordinary company poised to surpass the market caps of Nvidia and Palantir within the next decade is the fintech leader, PayPal Holdings (PYPL). Although PayPal currently has a smaller market cap of $71 billion, it’s essential to consider that this prediction assumes a proportional reduction in the valuations of both Nvidia and Palantir by 2035.
According to projections made by Roots Analysis and other research firms, the worldwide fintech market with potential opportunities is expected to expand from $222 billion in 2024 to over $1.8 trillion by 2035. Despite increasing competition in digital payments, PayPal is strategically positioned to capitalize on this substantial global opportunity.
Although PayPal’s growth in active accounts may not have been as strong over the past two years, many of its main performance metrics (key performance indicators or KPIs) have been moving positively. Starting from the end of 2020, the total volume of transactions made on PayPal’s digital platforms has risen significantly, reaching an annual rate of $1.67 trillion by the end of its March 2025 quarter, based on previous quarters.
During the past year, the typical number of transactions made by active accounts increased significantly, rising from approximately 41 to about 59 over the same period. This means that active accounts are now much more actively involved than they were around four and a half years ago. This heightened engagement suggests that profits could grow steadily in the future.
A significant advantage for PayPal, in addition to the chance of penetrating underbanked developing markets, is its robust share buyback plan. Over the past ten years, PayPal has decreased its outstanding shares by more than 20%, a move that should significantly boost its earnings per share (EPS).
Intuitive Surgical: current market cap of $184 billion
Among the three outstanding stocks, it’s predicted that Intuitive Surgical (ISRG), a pioneer in robotic-assisted surgical systems, could surpass both Nvidia and Palantir by 2035. At present, ISRG lags behind Palantir by approximately $172 billion and Nvidia by around $4 trillion in market value.
One advantage of many healthcare stocks lies in their resilient character. Regardless of the state of the U.S. economy or stock market, individuals will continue to experience health issues and demand prescription medications, medical equipment, preventative care services, and surgeries. As a result, most healthcare companies enjoy consistent annual cash flow due to this ongoing need for healthcare services.
In terms of its market dominance within robotic-assisted surgery, Intuitive Surgical maintains a strong and enduring hold. The installation of 367 Da Vinci surgical systems during the first quarter of this year brought their total number of installations throughout the 21st century to over 10,000. Although this figure may not initially appear significant, the substantial price tag attached to these systems and the extensive training required for surgeons to operate them have led to a remarkable loyalty among customers towards Intuitive Surgical.
Over the years, Intuitive Surgical’s income structure has shifted to a more advantageous position in terms of profit margins. Initially, in the 2000s, most of its earnings were generated by selling the expensive yet costly-to-produce da Vinci surgical system. However, currently, the company derives the majority of its sales from instruments, accessories for procedures, and system maintenance – all high-profit areas that are driving EPS growth at a faster rate than overall revenue.
The last missing piece is that their surgical capabilities are still largely untapped in terms of practical applications. Expanding into thoracic, colorectal, and soft tissue operations could unlock opportunities that might maintain a growth rate of over 10% for the next decade, if not longer.
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2025-07-20 10:17