Palantir Technologies (NASDAQ: PLTR) has emerged as one of the hottest stocks of 2024. The stock has gained an astonishing 370% year-to-date, and this has really caught the eye of investors. The reason behind this meteoric rise in the stock is the adoption of AI solutions by governments and businesses worldwide. But now that its valuation is soaring, the big question is: is it still a good buy?
Palantir’s Stock Journey
Palantir’s this year has been nothing short of extraordinary. A $100 investment at the end of 2023 would now be worth $470. The company has been able to meet growing global demand for innovative solutions through its expertise in AI. Its contracts with government agencies and private organizations have greatly boosted its credibility and revenue.
With high growth, comes high valuation. The P/E ratio of Palantir stands at a staggering 411. That kind of multiple poses the question of whether this stock is overpriced for those investors who are currently looking to invest in the stock.
TSMC: The Best AI Stock Alternative
TSMC stands for Taiwan Semiconductor Manufacturing Company, which just so happens to be one of the leading manufacturers in the world of chip-making companies. Unlike Palantir, which focuses on AI software, TSMC just so happens to be a very prominent name in AI hardware. It makes advanced semiconductor solutions important in producing AI chips, with leaders like Nvidia, AMD, and Broadcom being major clients.
TSMC is doing well in the area of the AI ecosystem. The ever-increasing demand for AI chips utilized for data centers, ML models, and high-performance computers, is helping out.
Mind-boggling TSMC Growth for the year 2024
TSMC’s revenues had more than doubled by a spectacular 32% in 2024, having recovered strongly from its 9% drop in 2023, and are confident of crossing the $90 billion annual revenue mark before the end of the year.
What’s driving this growth? The more widespread use of AI applications and their increasing demand for GPUs and custom AI processors is the main driver. Global chipmakers require TSMC’s world-class fabrication facilities to manufacture those critical components.
The future of TSMC is going to be driven by the increasing demand for AI hardware. AI chips are the next big thing as they are required for processing data in data centers, which is a booming market.
Big industries to come about for companies such as Broadcom and AMD include a tremendous growth level for this industry. Broadcom saw $12.2 billion in revenue for AI chips in 2024 with 220% growth in comparison with the previous year. In addition, the company AMD predicts annual 60% growth for an AI accelerator market to bring the sector to $500 billion in 2028.
TSMC is increasing its capacity to satisfy the exploding demand. By 2025, this company will have doubled its advanced chip packaging capabilities allowing it to fill orders and therefore maintain robust growth.
Why TSMC Is A Better Value Play
TSMC looks a lot more attractive in comparison with Palantir in terms of valuation. It is showing a trailing P/E of 33 and a forward multiple of just 23. Also, it’s expected to post an earnings growth of 27% in 2025 versus the estimated 25% of Palantir.
Another thing is its leading market position. It owns about 64% of the global foundry market and is much ahead of any competitors such as Samsung. This makes TSMC a critical player in the AI and semiconductor industries.
Palantir vs. TSMC: Which to Choose?
The company does have a good story regarding its growth, and there is great appeal for such investors who are believers in the long-term future of AI software. However, the high valuation with slower earnings growth is a limitation of future returns.
TSMC, however, gives a balanced blend of growth and value. The strategic moves into AI hardware and monopoly in the market make the stock a very attractive safe and long-term play in the AI space.
Conclusion
Palantir’s 2024 has been little short of spectacular except that it leaves new investors to the steepness of its valuation. Alternately, those who made it through to miss it at its early gain can take comfort in TSMC.
The companies serve different areas of the AI ecosystem, but they give you a sense of just how huge the opportunities in this still-emerging area are. Whether you take Palantir, TSMC, or perhaps both, the future is bright for AI and, more importantly, its underlying stocks.
