Palantir stock has outperformed AI semiconductor companies this year. This isn’t surprising considering the effectiveness of its AI platform.
Palantir’s earnings growth accelerated last quarter, a trend that could continue into 2026.
The company has a large backlog that justifies its pricey valuation, and its growing customer base should help it secure larger contracts.
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Semiconductor stocks have been among the biggest beneficiaries of the artificial intelligence (AI) boom over the past three years. This is not surprising since chips are the fundamental building blocks of AI infrastructure. Without chips, it would be impossible to train large language models (LLMs) and run inference applications.
Therefore, chip manufacturers, e.g. NVIDIA, Broadcom, AMDand others have brought considerable returns to investors. However, the returns in 2025 are being eclipsed by software experts helping customers integrate generative AI tools into their operations.
Palantir Technology(NASDAQ: PLTR) By 2025, the stock will gain 122%. This is well above the 41% gain in 2025 PHLX Semiconductor Division Index this year. There are signs that Palantir will outpace chip stocks’ returns in 2026, too. Let’s see why this happens.
Image source: Getty Images.
There is no doubt that chipmakers are key cogs in the AI ​​ecosystem, but it is the software companies that will ultimately help end users unlock the benefits of this technology. That’s exactly what Palantir is doing with its Artificial Intelligence Platform (AIP), a suite of software tools that help businesses connect their data and operations with LLM to improve operational efficiency, unlock productivity gains, automate processes and reduce redundancy.
The effectiveness of AIP is encouraging rapid adoption of the platform. Palantir management noted on the company’s November earnings call that enterprises tend to scale AIP deployments across the business after initial deployment. That doesn’t include the new customers AIP has helped Palantir attract.
This explains why Palantir wins bigger contracts, reports excellent profit growth, and achieves triple-digit earnings growth. In the third quarter of 2025, its revenue growth accelerated to 63%, while earnings increased even more, reaching 110%, to $0.21 per share. Even better, Palantir secured $2.76 billion in new contracts last quarter, a 151% year-over-year increase.
The new contracts are worth twice as much as revenue, suggesting the company is now on track to achieve faster revenue and profit growth in the future. As a result, Palantir’s earnings forecasts for the current and next two years have been significantly raised.
Data comes from YCharts.
There’s a good chance Palantir will exceed those expectations. After all, the company’s total outstanding contract value was $8.6 billion last quarter, a 91% increase from the same period last year. That figure is more than double Palantir’s $3.9 billion in revenue last year. In addition, Palantir’s customer base grew 45% year-over-year in the third quarter.
If these new customers continue to expand use of Palantir’s artificial intelligence software platform, its impressive earnings growth will likely continue into 2026. That’s why the stock is likely to maintain its strong momentum.
Palantir shares hit a 52-week high after releasing third-quarter results on November 3. However, the stock has since fallen 19% due to valuation concerns. Even analysts don’t expect much upside in the coming year, with the median 12-month price target pointing to a 14% upside from current levels.
Given that the stock trades at 166 times forward earnings and 107 times sales, you might be wondering how Palantir can outperform chip stocks in 2026. After all, its current valuation is too high, which could weigh on the stock in the year ahead. But don’t forget that Palantir posted triple-digit earnings growth last quarter.
What’s more, its earnings growth has been accelerating this year. Palantir reported second-quarter earnings growth of 77% and first-quarter earnings growth of 62%. Considering its expanding customer base and large backlog of revenue, this trend is likely to continue next year as well. As a result, Palantir’s earnings are likely to grow much faster than the consensus estimate of 37% in 2026.
As a result, Palantir is well positioned to justify its expensive valuation by beating Wall Street’s expectations across the board next year. Ideally, this should pave the way for more upside for this AI stock, allowing it to potentially outperform AI chip stocks in 2026 as well.
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Nvidia and Palantir Technologies. “Motley Fool” recommends Broadcom. The Motley Fool has a disclosure policy.
Prediction: Artificial Intelligence Software Stocks to Outperform All Chip Stocks in 2026 Originally published by The Motley Fool
