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In the current market, certain tickers have transcended their underlying businesses to become something closer to articles of faith. Palantir Technologies (PLTR) is perhaps the most prominent example. Propelled by the generative AI arms race, its stock has delivered returns that defy conventional analysis. The source material I’m looking at cites a rise of “more than 2,600%” since the start of 2023. That isn't a typo.
This ascent has placed Palantir in the rarified air of the world’s top 25 largest companies, with a market capitalization hovering around $420 billion. It's a staggering figure for a company whose software, while undeniably impressive, is now valued more richly than entire legacy industries. Retail investor forums treat the stock as a crusade, a testament to American technological supremacy.
But my job isn't to cheerlead. It's to look at the numbers and ask a simple question: Does the valuation align with the business reality? When I run the analysis, a significant discrepancy emerges. The story of Palantir is powerful, but the mathematics behind its stock price are becoming increasingly tenuous. This opens a clear opportunity for companies with more tangible, grounded fundamentals to close the gap. Two, in particular, stand out: ASML and AMD.
Deconstructing the Palantir Premium
Let's start with the core problem: Palantir's stock and its business have become decoupled. The company trades at a jaw-dropping 277 times forward earnings. To put that in perspective, that is a valuation that prices in not just success, but near-perfect, unprecedented, multi-year execution without a single misstep.
Let’s model this out. To even begin to justify today’s price, you have to subscribe to a set of truly heroic assumptions. If Palantir manages to grow its revenue at a sustained 50% pace over the next five years—a monumental task for any company of its size—and simultaneously achieves a 35% profit margin (a best-in-class figure), it would still be trading at 46 times its 2030 earnings. You are paying a premium today for a price that might look reasonable six years from now, assuming flawless execution. That is not an investment; it is a speculation on perfection.
This isn't a critique of Palantir's product. The Gotham and Foundry platforms are powerful data analytics tools, proven effective by government and commercial clients. The issue is purely one of valuation. The market has priced the stock not on its current or even near-term future earnings, but on a narrative about its potential to become the central operating system for the entire AI economy.
This narrative is further complicated by the increasingly public political declarations of its CEO, Alex Karp. His vocal support for Donald Trump's border and national security policies introduces a variable that is notoriously difficult to price. While Karp frames his alignment as pragmatic, the perception of a company going "full MAGA" creates unquantifiable brand risk. In a recent interview, the Palantir CEO defends support of Trump, addresses claims he's gone 'full MAGA', but does this stance solidify its relationship with one political faction at the expense of alienating a broader commercial client base or future administrations? The data on this is, frankly, non-existent, making it a pure gamble for investors.
The Tangible Titans in the Wings
While Palantir’s valuation floats in the stratosphere of narrative, AMD and ASML remain tethered to the much more solid ground of physical reality. Their market caps, at $378 billion and $400 billion respectively, are within striking distance of Palantir’s. The crucial difference is the foundation upon which those valuations are built.
Let’s start with ASML. This isn't just another chip company; it's a genuine technological monopoly. ASML is the sole manufacturer of the extreme ultraviolet (EUV) lithography machines required to produce the world's most advanced semiconductors. Every single advanced AI chip from Nvidia, AMD, or anyone else, starts its life inside an ASML machine. Its fortunes are directly tied to the physical expansion of AI infrastructure. As long as the world needs more powerful chips—and there is no indication that demand is slowing—it needs more of what only ASML can sell.
I've analyzed countless companies with supposed "moats," but ASML's position is unique. Their monopoly isn't just a market advantage (like a strong brand or network effect); it's a fundamental chokepoint for the entire global technology ecosystem. From my perspective, the fact that its valuation is currently below Palantir's represents a significant market inefficiency. What is a more durable business model: selling mission-critical software or selling the one machine everyone needs to build the future?
Then there's AMD. For years, it has been the scrappy underdog to Nvidia's undisputed dominance in the GPU market. But the sheer, overwhelming demand for AI computing power has created an opening. Major tech players are desperately seeking a viable second source to mitigate their dependence on Nvidia, and AMD is stepping into that role. Recent announcements of major contract wins signal a shift. While these deals won't fully materialize on the balance sheet until 2026, they represent tangible, large-scale orders for physical hardware. AMD's path to growth doesn't require a belief in a paradigm-shifting narrative; it just requires them to execute on building and selling the chips their customers have already agreed to buy.
Neither AMD nor ASML is "cheap" by traditional metrics. But their valuations are connected to clear, demonstrable business wins and defensible market positions. They are selling the picks and shovels in the AI gold rush. Palantir is selling a map to a city of gold that may or may not exist at the scale its stock price implies.
Gravity Has a Perfect Record
The market can remain irrational longer than you can remain solvent, as the old saying goes. Palantir is a brilliant case study in the power of narrative to drive a stock price far beyond its fundamental anchors. The combination of a genuinely innovative product and a charismatic, outspoken CEO has created a powerful allure. But a 277x forward earnings multiple isn't just optimistic; it's a mathematical liability. The stock must now spend the better part of a decade simply growing into its own valuation, a period during which any stumble will be severely punished.
AMD and ASML don't have this problem. Their growth is tied to the concrete, measurable demand for the foundational elements of the AI revolution. One controls a technological chokepoint, the other is capturing overflow from a market leader that can't meet demand alone. My analysis suggests that by the end of 2026, the market will have corrected its present infatuation with narrative in favor of the tangible. The weight of real-world earnings and physical products will, as it always does, eventually pull valuations back to earth.
