Artificial intelligence (AI) has been a powerful tailwind for the stock market in recent years, but certain Wall Street analysts still see substantial upside in Palantir Technologies (PLTR -0.39%) and Advanced Micro Devices (AMD -2.36%), as follows:

• Dan Ives at Wedbush believes Palantir could be a trillion-dollar company within two or three years. That implies 300% upside from its current market value of $250 billion.
• Hans Mosesmann at Rosenblatt Securities recently lowered his 12-month target price on AMD to $225 per share. But that still implies 110% upside from its current share price of $107.

Here's what investors should know about these artificial intelligence stocks.

Palantir Technologies: 300% implied upside

Palantir specializes in data analytics. Its software products help commercial and government clients integrate complex information, develop machine learning models, and surface insights. International Data Corporation recently recognized Palantir as a leader in decision intelligence software, and Forrester Research recently ranked the company as a leader in artificial intelligence (AI) platforms.

Palantir reported exceptional financial results for the fourth quarter, beating estimates on the top and bottom lines. Its customer count jumped 43% to 711, and the average existing customer spent 20% more. In turn, revenue rose 36% to $828 million, the sixth consecutive acceleration, and non-GAAP earnings increased 75% to $0.14 per diluted share.

Following the report, Mark Giarelli at Morningstar wrote, "Palantir's outstanding fourth-quarter results, rapid growth amid the artificial intelligence arms race, and strategic positioning in the AI-value chain further solidify our base case expectations that this company can be the next software juggernaut."

Wall Street expects Palantir's adjusted earnings to increase 37% in the next four quarters. That consensus makes the current valuation of 270 times adjusted earnings look absurdly expensive. Admittedly, Palantir beat expectations in the last six quarters, and its earnings topped the consensus estimate by an average of 14% in that period.

However, the stock would still look expensive even if Palantir's earnings increase twice as fast as Wall Street anticipates in the next year. So, while I believe the company will be worth more in the future, perhaps even $1 trillion, I also believe better buying opportunities will present themselves. Investors should be cautious chasing the stock at its current price.

Advanced Micro Devices: 110% implied upside

Advanced Micro Devices is a semiconductor company best known for developing Ryzen and Epyc central processing units (CPUs) and Instinct graphics processing units (GPUs) for data centers, personal computers, and gaming systems. The company also develops embedded processors across a range of end markets, including automotive driver assistance systems and industrial machine vision systems.

Importantly, while Intel is still the market leader in x86 CPUs for data center servers and personal computers as measured by units, AMD has gained substantial market share in recent years. Those share gains have been driven by a combination of AMD's innovations and Intel's missteps. And analysts generally anticipate more of the same in the coming years.

However, AMD has been mostly unsuccessful in its attempts to compete with Nvidia in data center GPUs, and there are two reasons: First, Nvidia consistently achieves the best scores at the MLPerf benchmarks, objective tests that measure the performance of AI systems. Second, Nvidia has a much more robust ecosystem of software development tools to help programmers build applications.

AMD reported decent financial results in the fourth quarter, despite missing data center sales estimates. Total revenue rose 24% to $7.7 billion and non-GAAP earnings rose 42% to $1.09 per diluted share. Disappointingly, CEO Lisa Su said data center sales in the first half of 2025 would be comparable with the second half of 2024.

However, sales growth in the data center segment should strengthen in the second half of 2025 as production of its latest Instinct MI350 GPU ramps up. Su also told analysts that data center AI products would increase from "more than $5 billion in revenue in 2024 to tens of billions of dollars of annual revenue over the coming years."

Wall Street thinks AMD's adjusted earnings will grow 41% in the next four quarters. That makes the current valuation of 33 times adjusted earnings look cheap. Those figures give AMD a price-to-earnings-to-growth (PEG) ratio below 1, which is typically interpreted to mean a stock is undervalued. Comparatively, Palantir has a PEG multiple above 7.

I doubt AMD shareholders will see triple-digit returns in the next 12 months, but the stock looks attractive at its current price. My only worry is that Wall Street may be overestimating earnings given that x86 server CPU sales are projected to grow 17% in 2025, while personal computer shipments are projected to increase 5%. Investors comfortable with that risk should consider buying a few shares, but I would keep the position small.