The past couple of years have been nothing short of euphoric for Palantir (PLTR) shareholders. With shares soaring over 925% in just two years, PLTR quickly became synonymous with artificial intelligence (AI) in the enterprise software space.
Palantir’s rally reflects the explosive demand for its AI platform (AIP). That momentum has been visible in the company’s accelerating revenue growth, expanding customer base, and record contract wins as organizations across industries adopt its AIP technology.
For instance, in the third quarter of 2025, Palantir reported revenue of $1.18 billion, a 62.8% year-over-year growth. Moreover, its top line jumped 18% sequentially. The company’s top line is benefiting from the acceleration in its commercial business. Commercial revenue surged 73% year-over-year and 22% sequentially to $548 million in Q3.
Contract activity has been impressive. Total contract value (TCV) reached $1.4 billion in the commercial business alone, up 132% year-over-year, while Palantir’s company-wide TCV climbed to a record $2.8 billion. The customer count has expanded to 911, up 45% from the prior year, and spending from major accounts continues to rise, with the top 20 customers generating an average of $83 million each. The company’s net dollar retention rate jumped to 134%, reflecting its ability to grow revenue from its existing customer base.
While the momentum in its business remains strong, the investment case for Palantir hits a wall when viewed through the lens of valuation. Palantir trades at a price-sales (P/S) ratio of 156.3x. It is astronomical compared to industry peers and historical norms for software companies. Consequently, despite the strong fundamentals, Wall Street analysts maintain a “Hold” consensus rating on the stock.
Thus, while Palantir is a high-quality company, investors should focus on an AI company that offers a better risk-reward profile.
For instance, other players in the AI sector are currently outperforming Palantir’s 2025 returns while trading at far more compelling valuation multiples. Against this backdrop, here is a “Strong Buy” AI stock that has outperformed PLTR this year and also beats it on value.
A “Strong Buy” AI Stock
Investors looking for opportunities beyond Palantir in the AI space could consider Seagate (STX). With its shares surging 229% year-to-date, STX ranks among the leading stocks in the S&P 500 Index ($SPX) this year. The rally in Seagate stock is driven by the robust demand for its high-capacity storage solutions, led by the rapid expansion of AI workloads.
As AI applications require large-scale data storage, Seagate is benefiting directly from this trend. Its high-capacity nearline drives are seeing surging demand. In the most recent quarter, data-center sales represented 80% of its total revenue. Demand from global cloud customers remained strong, and enterprise OEM markets began to rebound. Management expects these trends to continue as AI workloads shift from model training to large-scale inferencing, a stage that requires massive, cost-efficient storage capacity.
Seagate’s business model adds stability and visibility to its growth. Its long-term contracts with key data-center clients provide revenue visibility through 2027, giving investors confidence in the sustainability of its growth. The company’s build-to-order manufacturing approach, combined with a focus on high-value, high-capacity products, positions Seagate to deliver strong earnings in the years ahead.
Despite the stock’s extraordinary run, Seagate’s valuation remains attractive. Seagate currently trades at a forward price-to-earnings multiple of 28.8x, which is compelling as analysts project a 43.3% jump in its EPS in fiscal 2026 and an additional 38.2% in fiscal 2027.
With strong demand, long-term contracts, an attractive valuation, and a “Strong Buy” analyst consensus rating, Seagate stands out as a compelling AI investment play.
On the date of publication, Sneha Nahata did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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