The artificial intelligence (AI) industry has emerged as one of the most lucrative and exciting areas in technology. With major breakthroughs and growing demand for AI solutions across various industries, it’s no wonder that investor interest is skyrocketing.
Palantir Technologies (PLTR), often considered a major player in the AI space, has benefited immensely from the AI boom. The company’s tools help organisations, especially in the public sector, make sense of massive amounts of data. However, its stock price has surged to a point where expectations may be unsustainable, with a $204 billion market cap that’s left investors wondering if the stock is overvalued.
While Palantir’s future remains uncertain, two other AI stocks are positioning themselves for significant growth in the coming years. These companies are poised to overtake Palantir in terms of valuation by 2026. Let’s take a closer look at why Qualcomm and Adobe could be better investment opportunities in the long run.
1. Qualcomm: A Hidden AI Powerhouse
Qualcomm (QCOM) isn’t the first company that comes to mind when you think of AI, but it’s quietly positioning itself as a leader in the space. Unlike some chipmakers, Qualcomm doesn’t produce GPUs or network switches. Instead, it focuses on delivering high-performance chips and processors for mobile devices, PCs, and automobiles. These devices will play a crucial role in the AI revolution in the coming years, and Qualcomm is well-positioned to benefit from this growing demand.
Why Qualcomm Will Benefit from AI Growth
- Smartphones and AI: Qualcomm’s Snapdragon processors are the top choice for high-end Android devices and have been adapted for use in PCs and automotive applications as well. As AI capabilities expand, these devices will need even more powerful processors, and Qualcomm’s chips are designed to meet that need.
- Licensing & Patents: Qualcomm also boasts a highly profitable licensing business that generates substantial revenue. Its patents cover important wireless communication technologies, including 3G, 4G, and 5G, which are critical for AI-powered mobile devices to function at their peak.
- AI on Device: With AI increasingly being integrated directly into mobile devices, demand for Qualcomm’s chips will likely surge. AI processing power is essential for everything from smart assistants to powerful photo editing apps, and Qualcomm is at the forefront of enabling these innovations.
The Stock Valuation
Despite its strong position, Qualcomm is undervalued. Trading at just 14.3 times its expected forward earnings, Qualcomm is a bargain compared to its competitors in the semiconductor and AI space. Its stock price could rise by about 25% in the near future, pushing its market cap to approximately $230 billion, which would surpass Palantir’s current valuation.
If Qualcomm can capitalize on the growing demand for AI on mobile devices, this stock could outpace Palantir in the next few years. The potential upside is significant, making Qualcomm a strong AI investment opportunity for the future.
2. Adobe: Revolutionising Creativity with AI
Adobe (ADBE) is a household name when it comes to creative software, with its industry-standard applications like Photoshop and Illustrator used by millions worldwide. But Adobe’s involvement in AI is perhaps not as widely recognised—yet. Over the past few years, the company has heavily invested in AI and machine learning, and its applications are becoming more AI-powered with each update.
Why Adobe Is a Key AI Play
- Generative AI in Creative Cloud: Adobe is one of the first companies to introduce generative AI into creative tools with its Firefly AI model. This allows users to generate designs, images, and even videos using AI-driven tools, making creative work more accessible than ever. Adobe’s Firefly has proven to be an attractive feature for new users, especially those who don’t have extensive design skills.
- AI in Marketing: Adobe is also tapping into the AI-driven marketing space. Through its GenStudio and other marketing solutions, Adobe is helping companies optimise their advertising campaigns by using AI to gather and analyse data. This makes it easier for businesses to target customers effectively and optimise their ad spend, opening up a huge market opportunity.
- AI-Powered Creativity: While many fear that AI could replace traditional creative roles, Adobe is embracing it to enhance creativity. By enabling more people to create, Adobe’s tools are likely to see greater adoption, particularly among those looking to leverage AI for content creation.
The Stock Valuation
Adobe’s stock is trading at less than 22 times analysts’ expectations for 2025 earnings. This is relatively low compared to its historical average, suggesting that there is significant upside potential. If Adobe can continue to roll out AI-powered tools that attract both amateur and professional creators, it could see substantial revenue growth in the coming years.
A 25% increase in Adobe’s stock price would push its valuation above $240 billion, exceeding Palantir’s current market cap. As the company continues to integrate AI into its offerings, Adobe’s stock could outperform expectations and become one of the top players in AI by 2026.
Comparing Palantir to Qualcomm and Adobe
While Palantir has benefitted from its advanced data analytics tools, its high stock price makes it a risky investment. Expectations for the company’s future growth are already priced into the stock, leaving little room for significant upside. In contrast, Qualcomm and Adobe offer much better value today, with room for growth driven by the increasing adoption of AI.
- Qualcomm is capitalising on the growing demand for AI processing in mobile devices and consumer electronics, offering an opportunity for strong growth.
- Adobe is enhancing its existing products with AI capabilities, opening up new revenue streams in the creative and marketing sectors.
Both stocks are undervalued relative to their future growth potential, making them attractive alternatives to Palantir. By 2026, it’s likely that both Qualcomm and Adobe will be worth more than Palantir, particularly as AI continues to revolutionise industries around the globe.
Should You Invest in Palantir?
Before investing in Palantir, it’s important to consider the valuation risks. While the company has strong growth prospects, its stock price has already surged significantly, which may limit future upside. Meanwhile, Qualcomm and Adobe provide investors with exposure to AI at a more reasonable price, making them more appealing options for long-term growth.
Relevant Links for Further Reading
- Palantir Technologies Stock Analysis
- Qualcomm AI Chips for Mobile Devices
- Adobe’s AI-Powered Creative Suite
- AI’s Role in the Future of Business
Photo credit: The Motley Fool
