Palantir or AMD: Cathie Wood Makes a Move on One High-Potential AI Stock

Toward the end of last month, Chinese startup DeepSeek sent AI stocks into a tailspin after the company released its latest AI model. Apparently, it surpassed its US counterparts’ performance while the company claimed it was developed at a fraction of the cost of US models.

Yet, Cathie Wood, CEO of ARK Invest, was sanguine about this development. “Lowering costs is great for the world,” Wood said in a Bloomberg TV interview. “They were collapsing anyway, DeepSeek has stepped it up a notch.”

Wood has made a name for herself as something of a risk taker and a contrarian and has never been afraid to make a bet that seems outlandish to others. She was an early champion of Tesla and Bitcoin, for instance, and has no problem going against the grain.

And her latest moves seem indicative of that kind of mindset. Palantir (NASDAQ:PLTR) and Advanced Micro Devices (NASDAQ:AMD) are two well-known AI stocks, but their fortunes have diverged in recent times. The former has become an AI darling, while the latter has been unable to use AI as a springboard. In light of these developments, Wood’s recent reshuffling of the ARK Invest portfolio might be a little surprising.

So, let’s see what she’s been up to and with help from the TipRanks database we can see whether the Street agrees with her latest direction.

Palantir

The first AI name we’ll look at is Palantir, a data analytics and software firm specializing in processing vast amounts of information for government agencies, financial institutions, and corporations – what you might call a Big Data company. Founded in 2003, Palantir initially focused on counterterrorism and intelligence applications, working closely with U.S. government agencies. Over the years, it has expanded its reach into the commercial sector, helping businesses optimize operations, manage risk, and improve decision-making through its offerings.

But the Palantir story really took off once it positioned itself as a leader in artificial intelligence, integrating AI-driven capabilities into its software to enhance data analysis and automation. Central to this effort is the Artificial Intelligence Platform (AIP), launched in April 2023 and designed to help organizations seamlessly deploy AI models while maintaining security, transparency, and control over their data.

The success of the AI-focused strategy was evident in Palantir’s latest quarterly results. Revenue increased by 36% year-over-year, reaching $827.52 million – $46.28 million above Wall Street’s expectations. This growth was driven by a 64% YoY increase in U.S. commercial revenue, which hit $214 million, while U.S. government revenue rose by 45% to $343 million.

At the other end of the scale, adjusted EPS of $0.14 surpassed expectations by $0.03. Palantir also delivered an upbeat guide, calling for Q1 revenue between $858 million and $862 million, well above Wall Street’s estimate of $799.36 million.

All that goodness resulted in a big post-earnings jump for the shares, a regular occurrence over the past year. During the period, PLTR shares have soared by a humongous 409% and maybe Wood thinks it might be time for a breather. In Q4, she sold 3,224,588 shares, trimming her holdings by 30%. Mind you, ARK still holds almost 7.8 million shares so still a sizeable stake worth over $971 million.

Palantir’s frothy valuation is seen as a problem by various market watchers, and it informs Jefferies analyst Brent Thill’s thesis on this high-flyer. The company’s Q4 results impressed but that, according to the 5-star analyst, does not make the stock ripe for the picking.

“PLTR delivered an exceptional 4Q with a record rev beat, growth acceleration across most top-line metrics and a rule of 81 (36% y/y rev growth, 45% op margin). Fundamentals have been strong and we are constructive on the accelerating US momentum, but CY25 rev guide implies 31% growth vs 29% in CY24, and PLTR would need to accel growth to 50% for 4 years and trade at 18x CY28E rev just to hold its stock price… Even if PLTR can accel growth to a 50% 4-year CAGR, it would have to trade at a 18x CY28E rev multiple (which would put PLTR among the richest names in software even 4 years out) just for the stock to hold its current price,”

Accordingly, Thill rates the shares as Underperform (i.e., Sell) while his $60 price target factors in a one-year decline of ~52%. (To watch Thill’s track record, click here)

The Street’s average price target is not that much more encouraging; at $88.60, the figure implies shares will drop by ~29% in the months ahead. All told, the stock claims a Hold (i.e., Neutral) consensus rating, based on a mix of 10 Holds, 5 Sells and 2 Buys. (See PLTR stock forecast)

AMD

So, the Palantir growth story has been all about riding the AI wave to Valhalla but, in sharp contrast, chip giant AMD’s trajectory has been more akin to a slog through the AI swamp. While PLTR stock has surged, AMD shares have been unable to show any AI-driven gains, with the stock actually falling by 32% over the past 12 months.

That has been a somewhat surprising development as not long ago the company was seen as Nvidia’s main contender in the AI chip world. It was never anticipated that AMD would take away Nvidia’s crown, but rather, the Lisa Su-led firm was expected to eat away at its dominance, something it has so far been unable to do in any meaningful way.

That fact has badly soured sentiment, even though the company has been posting solid quarterly results on a regular basis. That was the case again in the recent Q4 readout.

The results showed the PC segment performing particularly well, a top-line beat, and adj. EPS meeting expectations. Additionally, the company’s Q1 revenue guide exceeded Wall Street forecasts.

However, all that meant little to investors who were left disappointed by the key issue – AI chip sales, where the company fell short of expectations. While the Data Center segment – home to the AI chips – posted a strong 69% YoY revenue uptick, this represented a slowdown from Q3’s 122% increase and missed the consensus estimate of $4.14 billion. Additionally, AMD did not offer full-year AI GPU guidance, forecasting a flat first half of 2025. However, the company expects accelerated growth in 2H, driven by the rollout of the MI350 GPU.

Wood must be sensing AMD will come good eventually, with the depressed share price offering an opportunity. She bought 421,275 shares in Q4, upping her AMD stake by 54%. ARK Invest now holds over 1.2 million shares, which command a market value of over $137 million.  

The company also has a fan in Loop Capital analyst Gary Mobley, who lays out the bull case for the chipmaker. He writes, “In a base-case scenario, in our view, AMD will: 1) take an additional 10ppts of X86 CPU market share from Intel by 2028 (in PCs & general servers); 2) Arm-based server and PC CPUs will grab market share from X86, but perhaps at a slower pace than what 3rd-parties expect (e.g., mid-teens-% share by 2028); 3) AMD can grab 20% of the data center GPU market by 2028; 4) custom AI ASICs grab only 15-20% of the data center accelerated compute market by 2028; 5) AMD’s FPGA and Gaming sales are in a strong cycle by 2028.”

“The most impactful levers in all of these assumptions is AMD’s market share in data center GPUs, and if AMD can grab 20% market share, this could alone drive an incremental $15-$20 billion revenue for AMD from FY24 to FY28,” Mobley went on to add. “Based on these assumptions, it is possible for AMD to generate $55-$60 billion in FY28 revenue, and at high-50% gross margin, AMD could have $11.00-$11.50 in non-GAAP EPS power in FY28.”

These comments underpin Mobley’s Buy rating while his $175 price target implies shares will gain 53% over the coming months. (To watch Mobley’s track record, click here)

24 other analysts join Mobley in the AMD bull camp and with an additional 11 Holds and 1 Sell, the stock claims a Moderate Buy consensus rating. Going by the $147.88 average price target, a year from now shares will be changing hands for a 29% premium. (See AMD stock forecast)

To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.