Better Artificial Intelligence Stock: Palantir (PLTR) vs. Alibaba (BABA)

• Alibaba generates much greater revenue and profits than Palantir.

• Palantir is growing much more rapidly than Alibaba.

• Alibaba's valuation looks much more attractive than Palantir's.

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If a five-year look at history is any guide, there's no contest in deciding between investing in Palantir Technologies (NASDAQ: PLTR) or Alibaba Group Holding (NYSE: BABA). Palantir's share price has skyrocketed a staggering 1,560% since its initial public offering in 2020. Alibaba's shares have plunged almost 60% during the same period.

But the past isn't always a great predictor of the future, and investor have to ask: Which is the better artificial intelligence (AI) stock going forward? Here's how Palantir and Alibaba stack up against each other.

These two AI stocks match up quite closely on at least one key financial metric. Palantir's return on equity is 12.36% compared to 11.44% for Alibaba. However, that's perhaps the only similarity between the two companies when it comes to financials.

Alibaba rakes in a lot more money than Palantir does. Over the last 12 months, the Chinese technology giant generated revenue of more than $996 billion with earnings of roughly $129.5 billion. Meanwhile, Palantir's revenue was $3.12 billion with earnings of nearly $571 million. However, Palantir has a higher profit margin -- 18.3% versus Alibaba's 13.1%.

Turning to the balance sheets, Alibaba's cash position of $428 billion is much larger than Palantir's $5.4 billion. On the other hand, Alibaba also has a lot more debt -- $248 billion compared to only $244.6 million for Palantir. As a result, Palantir's debt-to-equity ratio of 4.4% is more attractive than Alibaba's ratio of around 22.8%.

Alibaba delivered solid growth in its latest reported quarter ending on March 31. Revenue increased by 7% year over year to nearly $32.6 billion. Adjusted earnings jumped 22% year over year to $4.1 billion. However, those numbers pale in comparison to Palantir's growth.

Palantir's revenue soared 39% higher year over year in the first quarter of 2025 to $883.9 million. The AI software company's earnings based on generally accepted accounting principles (GAAP) more than doubled to $217.7 million. Its non-GAAP earnings vaulted nearly 70% higher to $334.4 million.

Will this disparity in growth continue? Probably, although it could narrow somewhat. Alibaba's AI-related product revenue has achieved triple-digit growth for seven consecutive quarters. The company's AI and cloud businesses have great long-term growth prospects.