Investing

Forget Palantir. These 2 Software Stocks Have More AI Upside

Joey Frenette

Published: February 12, 2025 11:42 am

Palantir (NASDAQ:PLTR) stock has been going into overdrive this past week, adding to the 22% or so gains enjoyed following what was a remarkable quarterly earnings beat. Now up more than 38% in the past week, though, I think investors keen on buying at these heights (shares are now above $110 per share) may need to sit on the sidelines and wait for the next pullback to provide a better entry point.

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Indeed, it can be difficult to witness a near-40% weekly surge from the sidelines. But as one of the most expensive stocks out there (over 95 times sales and counting…), I argue it’s better to invest in similar AI software names that are flying under the radar. While I do not doubt Palantir’s growth, I do think the stock is overbought, overheated, and overdue for a correction.

Despite the magnitude of the latest beat, plenty of analysts are in no rush to turn bullish on the name now that it’s gotten a whole lot more expensive. Jefferies analyst Brent Thill sees the company as at risk of becoming a victim of its own success. Although only time will tell how the great Palantir rally ends, I think it will be tough to keep moving the needle higher on earnings from here.

For investors seeking value in other similar areas of the software scene, the following stocks may have more upside (and more modest quarterly expectations) for 2025.

Snowflake

Snowflake (NYSE:SNOW) stock may be one of the market’s more notable year-to-date winners, gaining close to 17% for 2025 thus far, but shares are still 22% off their 52-week highs. And zooming further out, you’ll see that the data cloud company’s shares are still off close to 53% from their all-time highs, just shy of $400 per share.

As a name that’s undergone a CEO change and a slew of noisy quarters in recent years, Snowflake still seems like a risky bet as it triples down in the AI era. And according to most metrics, shares are still expensive. That said, compared to Palantir, Snowflake looks like a relative bargain while it’s going for just north of 18 times price-to-sales (P/S).

With an AI-minded new top boss, an appetite for bolstering its ecosystem via M&A (the company is reportedly going after analytics startup Redpanda), and plenty to gain as more AI model makers aim to become the next DeepSeek on the low-end or OpenAI on the high-end, Snowflake certainly stands out as a comeback play that may very well follow in the footsteps as the likes of a Palantir. 

Indeed, the company built a very capable, low-cost model using the Mixture-of-Experts (MoE) architecture well before DeepSeek splashed onto the scene. Perhaps the innovation was downplayed, given it was an enterprise-grade model rather than one for the mass consumer. In any case, I expect Snowflake to make some serious noise in the new year as AI agents and copilots become more capable and impactful.

Adobe

Adobe (NASDAQ:ADBE) is arguably one of the least-loved AI stocks in recent years, with shares still down 37% from its 2021 all-time highs. The creative software company could gain more attention as the firm takes a deep dive into agentic AI.

The company’s CFO stated that agents are a “natural evolution in the journey.” Undoubtedly, it will be interesting to see how the ailing firm fares as we shift from the initial generative AI boom to one that could see AI systems make more decisions for users.

The company’s new Firefly Bulk Create tool reportedly generates 10,000 images with just a single click. While that’s a ton of customizability for users, it’s also a lot to sift for a human to sift through. With the help of an agent who knows its user well, though, perhaps Adobe will be able to get a step closer to reading its user’s minds, so to speak.

In any case, Adobe is a firm with an underappreciated AI tailwind and a very modest 21.3 times forward price-to-earnings (P/E) multiple. If you want value and top-tier AI exposure, you’ve got one with Adobe at around $430 per share.