Palantir Technologies(NASDAQ: PLTR) was one of the hottest artificial intelligence (AI) stocks in 2024, and for good reason. Growth accelerated as U.S. commercial clients began adopting the company's Artificial Intelligence Platform while its largest customer, the U.S. government, also began to increase spending.
The company still has a lot of opportunity in front of it, as much of its early AI success with commercial clients has come from proof-of-concept work. As it moves these customers to production, revenue will accelerate even more.
Against that backdrop, let's look at three cheaper AI stocks that investors could consider.
Nvidia
Like Palantir, Nvidia(NASDAQ: NVDA) has been a big AI winner. However, its stock trades at a much more attractive value, with a forward price-to-earnings (P/E) ratio of 32 based on 2025 earnings and and a price/earnings-to-growth (PEG) ratio of 1. A PEG ratio below 1 is typically viewed as undervalued, but growth stocks will often have PEG ratios well above 1.
Nvidia has been the biggest beneficiary of the AI infrastructure buildout as its graphic processing units (GPUs) have become the backbone of the computing power needed to train AI models and run inference. If there was any thought that spending of AI infrastructure was about to slow, Microsoft's announcement that it planned to spend $80 billion this year on data centers to handle AI workloads should put that to rest.
That's an enormous amount of money being poured in AI infrastructure by a single company. To put that in perspective, that's more than the gross domestic product (GDP) of Panama or Croatia. While not all of this spending will go toward GPUs, a meaningful portion will.
Meanwhile, mega-cap tech companies typically don't like to be outshined. A number of large tech companies have called AI a generational opportunity, so expect other hyperscale companies (those with huge data center operations) to also look to ramp up their AI data center spending.
With an approximate 90% market share in the GPU market, Nvidia looks like it will continue to be an AI winner.
Image source: Getty Images.
GitLab
GitLab (NASDAQ: GTLB) is growing at similar rate to Palantir, but trades at a much cheaper valuation. The company operates a DevSecOps platform that helps software developers create software while also integrating cybersecurity throughout the process.
Last quarter, GitLab produced revenue growth of 31%. It was its sixth consecutive quarter with revenue growth between 30% and 40%. This growth is being fueled by its GitLab Duo offering, which is its suite of AI-powered tools that help programmers write code through automation and suggestions.
GitLab Duo is an add-on option to its Ultimate and Premier platforms. Last quarter, the company booked five new six-figure deals that included Duo. In addition, the product seems to be a hit with existing customers. It had a strong net revenue retention of 124% last quarter, while also seeing the best churn and contraction numbers as a percentage of renewals in the past three years.
The company is also seeing strong adoption of its GitLab Dedicated solution. This is similar to Ultimate but gives customers additional features such as data isolation and regional data residency. Dedicated is also driving demand for Ultimate, as users must first be on Ultimate to gain access to Dedicated. Currently, about 48% of its customers are on Ultimate. The company also recently announced a deal with Amazon, so that Amazon Web Services (AWS) customers using Ultimate will be able to deploy secure code faster on AWS.
Trading at a forward P/S of 10.5 next year's estimate with more than 30% revenue growth, the stock is an attractive high-growth stock.
AppLovin
AppLovin(NASDAQ: APP) has been an even hotter stock than Palantir over the past year, but it trades at a much more reasonable valuation with a forward P/E ratio of 37 times 2025 estimates with a PEG of only 0.59.
The adtech company for video game apps has seen explosive growth come from its AI powered adtech tool Axon-2, which helps target new potential game users. Meanwhile, Axon-2's predictive machine learning only gets better at targeting gamers the more it is used, which helps drive further growth.
Last quarter, its software platform, home to Axon-2, saw its revenue grow 66% to $891 million, while overall revenue climbed 39% to $1.2 billion. Software platform revenue rose by 50% or more over the past seven quarters. The company thinks it can achieve 20% to 30% platform revenue growth just within its gaming customers over the long term through overall gaming market growth and advancements in the algorithm as it learns.
However, it is looking to now expand Axon-2 to the broader e-commerce vertical. It has seen success with e-commerce customers in early tests and thinks the e-commerce vertical can become a meaningful revenue contributor this year. If AppLovin is able to successfully move Axon-2 beyond gaming, there could be a lot of upside still in the stock.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in GitLab. The Motley Fool has positions in and recommends Amazon, AppLovin, GitLab, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
