Nvidia (NVDA) may have recently edged Intel out of the Dow Jones Industrial Average but that doesn’t mean the artificial intelligence (AI) leader is on every important list this season.
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NVDA stock has enjoyed an excellent year, rising more than 190% and garnering increasingly positive Wall Street sentiment, outpacing many of its Magnificent 7 peers, including Tesla (TSLA) and Apple (AAPL) .
Despite this encouraging performance, Nvidia appears to be falling out of favor with some of the financial sector’s best-performing mutual funds. When Investor’s Business Daily unveiled its list of top stocks that leading mutual funds are buying this month, Nvidia failed to make the list for the second consecutive month.
In fact, only one member of the Magnificent 7 made it to last month’s list, and it isn’t even the group’s best-performing stock for the year. However, one smaller company has made the list for the past two months.
Funds like these tech stocks more than Nvidia
Given the strong year that NVDA stock has had, it may seem odd that top mutual funds would focus on other investments. However, this trend suggests that the sentiment that Nvidia is overvalued may be growing. The companies that have made the recent lists suggest that while some institutional investors are still prioritizing AI market exposure, they are seeking it through other companies.
This month, Meta Platforms (META) edged out all its Magnificent 7 peers, representing the group of high-growth tech companies on its own. The Facebook and Instagram parent is going all in on AI, as evidenced by its new plans to spend $10 billion on building its largest AI hyperscaler data center in Louisiana.
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META stock has surged 90% over the past year, but these funds clearly still believe it has room to run. However, a non-Magnificent 7 company may offer even more growth potential.
For the past year, Palantir Technologies (PLTR) has been a rising star in the red-hot AI market. Billed as a data analytics company, Palantir's software platforms are used for data integration, intelligence and counter-terrorism initiatives, and accessing many large language models. Over the past year, it has outperformed even Nvidia, skyrocketing more than 300%. This momentum accelerated over the past two quarters, during which shares surged 200% as market conditions shifted in its favor.
While PLTR stock declined on Monday amid high volatility, some experts aren’t worried. Ed Ponsi of Barchetta Capital Management discussed it in TheStreetPro, stating that he is sticking with Palantir as he regards the recent price action as a “bump in the road” for the company.
“Palantir remains well above its 50-day (blue) and 200-day (red) moving averages, both of which are climbing,” he noted.
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Stephen Guilfoyle, founder and President of trading operation Sarge986, issued a similar take, maintaining a bullish stance on PLTR stock. “Given the macroeconomic data-points that we expect to be released over the next two days and the potential for firm-specific news on Friday,” he states, “it might seem obvious that the firm will go through a period of increased volatility.”
Guilfoyle maintains a bullish $90 price target, adding that he considers Palantir’s relative strength to be “very strong.” The firm-specific news that might come this Friday is whether or not Palantir will be added to the Nasdaq 100, which would be a likely growth catalyst if it happens.
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Is Palantir the new Nvidia?
With the AI market continuing to grow, Palantir is in an excellent position to keep growing. And despite all its growth over the past year, PLTR stock still trades at only $70 per share, as of this writing. This suggests that it still has ample growth potential as AI technologies continue to shape entire industries and drive growth for companies both large and small.
The top mutual funds who have been opting to buy Palantir over Nvidia are likely doing so because of its low price point. Despite its status as the tech sector’s most dominant AI player, Nvidia investors must account for the threat of rising competition that is only increasing. Palantir doesn’t come with such significant risk.
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Investors may see it as this year’s Nvidia, a high-growth AI innovator with significant upside potential.
Additionally, the addition of former PayPal leader David Sacks as White House AI and crypto czar is likely to help spur growth for Palantir, as it will mean fewer restrictions for AI companies. This applies to other tech stocks as well, but Palantir is also likely to receive lucrative defense contracts from the U.S. government as geopolitical tensions continue to rise.
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