Meta and Palantir are joining forces in the field of defense technology, artificial intelligence (AI). Which stock is the better buy?

It’s no secret that in recent years, investors have become increasingly curious about the prospects offered by artificial intelligence (AI). That said, I have found that much of the discussion about AI is largely redundant.

Software companies tout how AI-powered services can deliver higher levels of productivity in the workplace, while hardware and infrastructure players essentially hold the keys to the AI ​​car through the power of data centers and semiconductor chips.

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More recently, though, I’ve started reading about the role of AI in the military. I already knew that Palantir Technologies (NYSE:PLTR) was an important player at the intersection of AI and the public sector. However, a recent announcement from Metaplatforms (NASDAQ: META) makes me think about AI defense applications in a new way.

Below I will explain why Meta’s new partnership with Palantir is so important. Additionally, I’ll be assessing which stocks I consider the better buy right now as the military AI movement heats up.

How does Meta help the military?

One of the biggest breakthroughs of the AI ​​revolution so far is the introduction of the Large Language Model (LLM). While there are a large number of LLMs on the market, OpenAI’s ChatGPT is probably the one you’re most familiar with.

Anecdotally, I found working in ChatGPT quite entertaining. I use the LLM to help me answer questions when I don’t have the patience to scroll through Google, and from time to time I’ve even used it to help me write software code for personal projects.

Unbeknownst to me, LLMs have much more power than improving productivity or answering questions at the click of a button. According to a recent press release from Meta, the company’s Llama AI model is making its way to the US government and adjacent private sector contractors.

According to the announcement, LLMs have “helped accelerate defense research and high-end computing, identify security vulnerabilities, and improve communications between disparate systems.”

I guess I’ve never really thought about it, but the military shares a lot of overlap with the private sector when it comes to operational pain points. But that said, the military isn’t just focused on efficiency; safety is his main concern. According to Mordor Intelligence, the total market size for AI analytics and robotic processing services in the defense sector will be worth more than $60 billion over the next five years.

As part of Llama’s commitment to the public sector, Meta has announced that it is partnering with none other than Palantir. Below, I’ll outline some valuation trends and additional talking points about Meta and Palantir, and assess which stocks look like the best opportunities right now.

Meta Stocks: Buy, Sell or Hold?

Meta’s AI thesis is quite simple. The company owns a number of social media platforms, including Facebook, Instagram and WhatsApp. Additionally, Meta also has a burgeoning operation focused on virtual reality, gaming and the metaverse.

On the social media side, Meta is in a lucrative position to deploy AI in a way that helps it understand its user base on an even deeper level. In turn, Meta can improve its targeted ad campaigns, which should theoretically yield greater engagement on its platforms. Furthermore, offering a unique range of virtual reality and gaming products opens the door to a whole new cohort of users on the platform, while diversifying the company’s ad-intensive business model.

I see Meta branching out into the defense space and expanding its AI capabilities in the public sector as a big deal and a smart choice to diversify its long-term roadmap. But despite these attractive tailwinds, Meta’s price-to-earnings ratio (P/E) of 27 is historically low. I think investors may be missing several big catalysts, making this an ideal time to buy Meta stock hand over fist.

Palantir Stocks: Buy, Sell, or Hold?

Palantir has become one of the largest profiles in AI in the past year. Following the release of the Palantir Artificial Intelligence Platform (AIP) in April 2023, the company has rapidly entered a renaissance characterized by accelerated customer acquisition, revenue growth and consistent profitability.

Palantir’s transformation has not gone unnoticed either. Earlier this year, the company announced a partnership with cloud computing specialist Oracleas well as a deal with Microsoft that combines AIP with Microsoft’s Azure cloud infrastructure at US defense agencies.

All of these developments are impressive, but have had a noticeable impact on Palantir’s stock price. As I write this, Palantir shares are up over 240% this year – making it the second best performing stock in the world. S&P500.

With a market cap of roughly $140 billion and a price-to-sales (P/S) multiple of 53, I have to say Palantir stock is out of control.

If you’ve read my previous pieces on Palantir, you know that I’m incredibly optimistic about the company’s future and that I fully intend to remain a shareholder. But right now, there’s just too much momentum fueling Palantir stock and its valuation has become disconnected from reality. For these reasons, I would hold off on Palantir for now, but I would encourage investors to be alert to potential selloffs and use them as opportunities to buy the dip.

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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adam Spatacco holds positions at Meta Platforms, Microsoft and Palantir Technologies. The Motley Fool holds positions in and recommends Meta Platforms, Microsoft, Oracle, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Meta and Palantir are joining forces in the field of defense technology, artificial intelligence (AI). Which stock is the better buy? was originally published by The Motley Fool