There are signs that two specific stocks might be improving.
Growth stocks, particularly those linked to artificial intelligence, are being eyed as key players in the ongoing bull market. Still, there’s a rising unease about the possibility of an AI bubble forming. This situation somewhat mirrors the dot-com bubble, with companies pouring billions into AI infrastructure, soaring valuations, and more circular loan transactions being noted.
Palantir (PLTR) stands out as one of the major beneficiaries of the AI surge. This company specializes in software that helps businesses and government entities leverage AI for informed decision-making. Its market cap has skyrocketed from $13.4 billion at the close of 2022 to a staggering $450 billion currently.
However, few stocks may be as directly influenced by AI trends as Palantir. If the momentum shifts, it’s possible that value stocks could become crucial for investors’ portfolios. In fact, there’s one particular value stock that has declined significantly but seems poised to outperform Palantir as soon as next year.
Can Palantir continue its rise in 2026?
Palantir has reported impressive financial outcomes over recent years, with CEO Alex Karp prioritizing enhancements to core products rather than just ramping up marketing efforts, which seems to have paid off. For instance, their sales surged by 48% year-over-year in the second quarter, exceeding $1 billion. Additionally, their operating margins expanded to 46%, as overhead costs have remained fairly stable.
The company’s Artificial Intelligence Platform (AIP) has greatly streamlined operations, allowing clients to integrate large language models into their existing software and utilize natural language prompts for interaction. It has made the software easier to use, leading to wider adoption. Palantir is also securing government contracts, including a notable $10 billion agreement with the U.S. military this summer.
That said, stock prices might be reflecting a different reality for the company. Currently, the stock trades at about 292 times its forward earnings, a striking valuation for a company of Palantir’s scale, especially with projected adjusted net income around $1.9 billion in 2025. With a price-to-sales ratio exceeding 100, the appeal isn’t very compelling. It’s no surprise that most of Wall Street’s generally optimistic analysts classify the stock as a hold or sell. The median price target of $165 per share hints at a market cap around $391 billion.
It seems likely that certain value stocks will continue to rise and may even surpass that valuation in the year ahead.
Value stocks that could outperform Palantir next year
Health insurance firms have faced a tough year that’s weighed down their stock prices, possibly creating some hidden value. Among them, UnitedHealth (UNH) has drawn attention, especially that of value investor Warren Buffett.
Like its peers in the insurance sector, UnitedHealth is dealing with escalating healthcare costs and growing utilization rates. However, being both an insurance company and healthcare provider means the firm faces challenges on various fronts, which puts considerable strain on profitability.
Moreover, while the entire sector is encountering regulatory pressures, UnitedHealth seems particularly in the crosshairs. The Department of Justice is investigating the company’s Medicare Advantage billing practices. Should they be found lacking, they could face significant financial repercussions. They also navigate antitrust inquiries due to their extensive insurance and pharmacy management operations, which might limit profitability.
Nevertheless, there are also grounds for optimism with UnitedHealth. Following a reassessment of expectations given the current challenges, management revised its 2025 outlook and provided updates alongside its third-quarter earnings report, raising the lower end of its earnings projection by $0.25 per share. Analysts’ revenue estimates for the upcoming year are being regarded as a solid starting point as the company aims to enhance the Medicare Advantage program through improved pricing and benefit adjustments. Margins are also anticipated to improve starting in 2027 after the Optum division manages existing costs this year and next.
The stock trades at around 21 times projected earnings for 2026—it’s not the cheapest but still below its five-year average. If the market begins to understand the factors influencing its price, this multiple could increase. Combined with a return to consistent profit growth starting this year, the company’s valuation might exceed $400 billion by the end of next year.
