Nearly every company that's even remotely related to the tech industry is betting that artificial intelligence (AI) will be a key driver of their business in the coming years. This is giving investors a lot of choices when it comes to picking an AI stock.
Two companies that have seen their share prices surge recently and are no doubt on some investors' AI stock short lists are telecommunications giant AT&T (T +2.06%), which is critical to connecting AI devices to the internet, and AI data analytics company Palantir Technologies (PLTR 3.29%).
Here's how the two companies stack up in the AI space.
Image source: Getty Images.
How both companies are taking advantage of the AI demand
AT&T may not be the first company you think of when you're thinking about AI stocks, but the telecom's massive wireless internet infrastructure is a key component to advancing AI services. For example, AT&T's ultra-fast 5G networks are used for AI-powered tech like autonomous vehicles.
Internet-enabled devices are becoming more powerful and more useful with AI, making fast and reliable internet connections even more important to powering AI assistants and other services. AT&T also works with tech giants, including Alphabet's Google and Microsoft, to establish edge network computing services that ensure AI and other services work well in specific locations.
But while AT&T helps with the connectivity of AI devices, Palantir is an actual artificial intelligence company. Palantir sells AI-powered analytics services and has grown rapidly as the U.S. government and private companies have clamored for its services.
NYSE: T
Key Data Points
Using AI to power analytics can help with everything from defense and military operations to managing supply chains and monitoring the electric grid. This wide application of services means that Palantir has a total addressable market of $1.4 trillion, according to Morningstar data.
Which company is growing faster?
It should come as no surprise that Palantir is growing much faster than AT&T. As a large, established telecom, there's only so much sales growth AT&T can experience.
AT&T's sales rose 2% in the first quarter to $30.6 billion, and non-GAAP (adjusted) earnings increased 6% to $0.51 per share. The company's management forecasts free cash flow of $16 billion for 2025 and adjusted earnings per share of $2.02, at the midpoint of guidance.
Meanwhile, Palantir's revenue spiked 39% in the first quarter to $884 million, and adjusted earnings rose 62% to $0.13 per share. Palantir is profitable, which not many young AI start-ups can claim, and the company actually raised its outlook for this year, in contrast to the many companies that have pulled their outlooks for 2025. It now expects full-year sales to increase 36% for the year, up from its previous estimate of 31%.
NASDAQ: PLTR
Key Data Points
Palantir is the clear winner
AT&T's telecom services are important to many AI companies, but Palantir is the better AI pure play. Its AI analytics revenue is growing fast, the company is profitable, and it's tapping into a massive market that's just getting started.
But before you mash the buy button in your brokerage app, it's important to mention that while Palantir is the better AI stock in this matchup, it's also very expensive. Palantir's trailing price-to-earnings ratio is an astronomical 546. Compare that to the S&P 500's P/E multiple of 24 and Nvidia (another major AI stock) at just 45.
This means that if you're considering buying Palantir stock, you might want to wait for its share price to dip a bit or start with just a small position. The stock's massive gains over the past couple of years have pushed its valuation so high that it's hard to justify the premium.
That doesn't mean Palantir's stock won't continue to gain ground, but investors need to know that they're paying an extremely high price for the stock if they buy now.
