The surge in AI began nearly three years ago, and it’s clear: AI is here to stay. Numerous companies are increasingly utilizing this technology to boost various functions, ranging from customer support to chatbots, advanced data analytics, and even decision-making. Fortune Business Insights suggests that approximately 35% of businesses have incorporated AI into their operations.
That translates to significant revenue streams for AI developers. Chip manufacturers, app developers, and data analysis companies together formed an industry worth $233 billion last year, expected to reach $294 billion this year. This growth indicates a compound annual growth rate (CAGR) of 29.2%, potentially hitting $1.77 trillion by 2032. It’s interesting to note that North American AI firms are taking the lead, holding about 33% of the market share by 2024.
Given these figures, it makes sense that UBS analysts are examining the landscape for promising AI stocks. A recent report focuses on two companies, Palantir and Advanced Micro Devices (AMD), as key players worth considering.
Palantir
Palantir stands out as a leader in integrating AI with data analytics. Established in 2003, it has gained a strong reputation, growing into a major player in the AI sector valued at around $441 billion. Its AI platform merges technology with human insight, enhancing data analysis while simplifying the user interface. Remarkably, users can interact with the AI using natural language—no coding skills required. This makes it versatile for applications like real-time translation, expanding its market reach internationally.
Palantir’s solutions have gained popularity within the Department of Defense, resulting in frequent announcements of new collaborations. For instance, it recently joined a program aimed at speeding up U.S. Navy ship production, and it partnered with Accenture to offer AI-driven solutions to federal agencies.
In its second-quarter 2025 report, Palantir showcased strong performance: a 43% increase in customers year-over-year contributed to a revenue surge of 48%, totaling $10.04 billion. The company reported non-GAAP earnings of 16 cents per share, slightly better than anticipated, and ended the quarter with $6 billion in cash and liquid assets.
Interestingly, Palantir’s stock has performed exceptionally well, outperforming the broader market consistently. It is listed on NASDAQ and has climbed 147% since the beginning of the year, while the S&P 500 saw an 11% increase. Over three years, Palantir’s stock has skyrocketed by about 1,849%.
However, UBS analyst Karl Keirstead acknowledges the company’s impressive growth while highlighting its high valuation. He rates Palantir’s stock as neutral, with a price target of $165, suggesting a potential drop of about 12% in the next year.
The market consensus also reflects caution, with 19 recent analyst reviews yielding four buy ratings, 13 holds, and a current stock price around $186.96. The average price target stands at $152.12, indicating room for a decline.
Advanced Micro Devices
Moving to AMD, the company is quickly becoming a significant player in the semiconductor market, alongside giants like Nvidia. While not yet part of the “Trillion Dollar Club,” it boasts a market cap nearing $280 billion. Over the last four quarters, AMD has pulled in around $30 billion in revenue, driven by a varied portfolio that includes PCs, gaming, and the rapidly expanding AI and data center markets.
AMD’s competitive edge has sharpened as it diversifies further into AI, enhancing its CPU and GPU offerings. The firm is not just keeping pace but actively challenging competitors like Intel in the realm of microprocessors.
Their recent acquisition of Nokia to power its fifth-generation EPYC processors highlights widespread applications of their technology. Additionally, AMD has rolled out advanced products targeting gaming, AI workloads, and content creation.
In its most recent quarter, AMD noted growth in both AI-related and gaming sales, with AI/data center sales growing to $3.2 billion and gaming revenue hitting $1.1 billion. Client revenues reached a record $2.5 billion, reflecting a 67% year-over-year increase, while total revenue rose by 32% to approximately $768.5 billion.
UBS analyst Timothy Arcuri provided a strong outlook for AMD, noting its data center GPU business is gaining traction and equalling Nvidia’s margins in some areas. He maintains a buy rating with a price target of $210 for AMD, highlighting solid fundamentals and future potential.
Analysts are generally optimistic about AMD, with a consensus rating of moderate buy based on 37 reviews—25 being buys and 12 holds. The stock is currently trading around $172.76, with an average price target suggesting modest potential upside.
