It’s tempting to get more aggressive at this phase in the AI boom, with tech stocks blasting off to new heights. Undoubtedly, we’ve all heard that valuations are on the high end. And with Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) continuing to build up that cash hoard to new record levels, questions linger as to whether there’s an AI bubble and if early signs are pointing to its bursting.

Though Buffett didn’t really reveal reasons for selling in his latest annual letter to shareholders, it seems prudent to steer clear of the high-momentum plays that one cannot fully understand. In this piece, we’ll look at two aggressive growth stocks, Palantir (NASDAQ:PLTR) and SoFi Technologies (NASDAQ:SOFI), to determine which name stands out as the better value after their impressive past-year run.

Palantir

Palantir’s red-hot stock seems to be home to many retail traders who may be in the name for nothing more than its sheer momentum. Undoubtedly, if a stock doubles up many times over in short order, you can bet that it will gain a ton of attention from those who strongly desire to get rich quickly. Indeed, pursuing quick gains tends to lead many to quick and steep losses. 

In the case of Palantir, there are no red flags with the business. However, given how blistering hot the name has been, you can imagine that the tiniest, mixed development will surely have an exaggerated negative impact on the share price. If a stock can soar by 1,000% in two years, it can plunge by over 90% in short order. Even if Palantir stock were to experience such a decline that’d devastate new investors, it’d still be in the green over the past two years!

In any case, with the stock nosediving around 27% in a week after a few concerning events, perhaps it’s best to sit things out as shares come back to Earth. Sure, Alex Karp is a visionary genius. And the business of AI-driven data analytics and big-league government contracts is incredibly lucrative. But that doesn’t mean you should pay a multiple that’s magnitudes above even the hottest Magnificent Seven stock.

At the time of writing, PLTR stock is in a bear market but remains very expensive, going for more than 86 times price-to-sales (P/S). Such a multiple entails profound growth, and investors probably won’t want to wait too long to witness such a continued growth spurt, especially with the firm raising the bar after that incredible quarter.

Though I’m still a believer in CEO Alex Karp, he does have a plan to sell nearly 10 million shares throughout the year. After delivering more than 10-bagger gains in two years, such profit-taking is only prudent, even if big catalysts are in store. With potential defense budget cuts from the U.S. government considered, perhaps patient investors waiting for an entry point will soon have it.

In any case, I’d look for more than a 30% discount from peak levels before considering entering the name. Also, waiting for the dust to settle could prove wise, given how quickly traders turned against the name last week. At the end of the day, Palantir is one of the better AI software innovators to own for the long haul. But you’ll have to get in at the right price to make money.

SoFi Technologies

SoFi stock stands out as a far better value for investors who don’t need to have that front-row seat to the AI software revolution. The company succeeded in steering into profitability last year and looks well-positioned to keep posting impressive double-digit growth rates moving forward.

With shares selling off on the release of some pretty decent quarterly earnings, perhaps growth investors looking for a disruptive fintech innovator for the long haul should consider watching the name closely as it hovers around $14 per share and 37.6 times trailing price-to-earnings (P/E).

SoFi’s fresh off of its “best year ever.” And though guidance left a lot to be desired, I certainly wouldn’t bet against the firm as the neobank ramps up on efforts to go after the market share of traditional banks with competitive rates and a wealth of other products that could beckon in the business of more than just those in the Millennials and Gen Z cohorts.

With the stock down around 20% from its 52-week highs, perhaps now’s a good idea to start thinking about punching a ticket to the $15.7 billion fintech firm before management has a chance to prove itself again.

The bottom line

SoFi stock stands out as the cheaper, more predictable play as it looks to grow profitably with its digital-first approach. Add AI’s potential into the equation, and I view SoFi as quite underrated following its latest correction.

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