Actions of Palantir Technologies (NASDAQ: PLTR) have more than quadrupled since the start of the year due to relentless demand for the company’s new artificial intelligence platform. However, the stock’s median price target implies a 48% downside. In this context, Shopify (NYSE: SHOP) and Arm holds (NASDAQ: ARM) present more attractive investment options.
Palantir is currently worth $165 billion, but I think Shopify and Arm can surpass that figure before the end of 2025. Some Wall Street analysts agree, as detailed below:
Loop Capital analyst Anthony Chukumba recently raised his price target on Shopify to $140 per share, implying a 23% upside from the current stock price of $114. This would give the company a market value of $180 billion.
Morgan Stanley Analyst Lee Simpson has a price target on Arm of $175 per share, implying a 28% upside from the current stock price of $137. This would give the company a market value of $183 billion.
Here’s what investors should know about Shopify and Arm.
Shopify integrates physical and digital sales channels into a single dashboard that allows merchants to manage their business across multiple storefronts. Shopify also offers a wide range of adjacent financial services and merchant solutions, including tools for business-to-business (B2B), also known as wholesale.
Investors may not view Shopify as a artificial intelligence (IA) company. But automation presents a big opportunity to better serve merchants and improve efficiency, and Shopify is addressing it. The company introduced a suite of AI tools called Shopify Magic that helps merchants organize their storefronts, generate marketing content, write product descriptions, and provide customer service. .
Additionally, Shopify uses artificial intelligence internally to help its engineering, sales, and finance teams. This should increase margins and lead to greater profitability over time. Indeed, the potential for margin expansion through AI is one of the reasons Loop Capital’s Anthony Chukumba recently increased his target price.
Shopify reported encouraging third-quarter financial results, beating estimates. Revenue rose 26% to $2.1 billion on equally strong growth in sales of subscription software and merchant services. In the meantime, non-GAAP earnings increased 46% to $0.35 per diluted share. The company expects similar sales growth in the fourth quarter.
Additionally, management highlighted strong increases in gross merchandise volume across three strategic growth areas: offline (27%), wholesale (145%), and international (30%). Shopify also said the number of international (meaning outside of North America) merchants on its platform increased by 36% in the third quarter.
Wall Street expects Shopify’s profits to grow 44% annually over the next three years. The current valuation of 107 times earnings therefore seems tolerable. As a caveat, while I think the stock can return 23% before the end of 2025, putting Shopify ahead of Palantir’s current market value, shares aren’t cheap. Investors should therefore start with a very small position.
Arm develops central processing unit (CPU) architectures and related products such as solutions for software development and system design. It licenses this intellectual property to companies that want to build their own chips. These companies benefit from outsourcing some chip-related R&D costs, while still retaining the ability to customize chip designs. Rivals like Intel And AMD do not offer the same flexibility.
The processor architecture defines how the hardware interacts with the software. Arm processors are known for their power efficiency, which has made them the industry standard for battery-powered mobile devices. For example, Arm has over 99% market share in smartphones. But the company has made big strides in improving performance with its latest architectures, which has helped share gains in the data center.
Indeed, NvidiaGrace Blackwell’s chips combine GPUs with Arm processors to accelerate data center workloads like artificial intelligence. And the three main public clouds — Amazon Web services, Microsoft Azure, and AlphabetGoogle Cloud — have deployed Arm processors in their data centers. Chief financial officer Jason Child said cloud computing customer sales growth hit a record high in the June quarter.
Most recently, Arm reported better-than-expected September quarter results, but the numbers themselves weren’t that impressive. Total sales increased 5% to $844 million due to strong growth in per-chip royalty revenue, offset by lower licensing revenue that management attributed to normal timing fluctuations. Meanwhile, non-GAAP earnings fell 17%, to $0.30 per diluted share.
However, management expects growth to accelerate in the coming quarters, such that full-year revenue and adjusted profit will increase by 22% in fiscal 2025 , which ends in March. Beyond that, Wall Street projects earnings growth of 33% annually through fiscal 2027. Against this backdrop, the current valuation of 100 times adjusted earnings remains expensive, but investors will have to pay a premium for hold shares now due to excitement over earnings developments. AI boom.
Importantly, while I think Arm shares can return 28% next year, so that they exceed Palantir’s current market value, investors uncomfortable with volatility should avoid these stocks. And even those who are comfortable with volatility should start with a very small position.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennevine holds positions at Amazon, Nvidia, Palantir Technologies and Shopify. The Motley Fool holds positions and recommends Advanced Micro Devices, Alphabet, Amazon, Intel, Microsoft, Nvidia, Palantir Technologies, and Shopify. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, and short January 2026 $405 calls on Microsoft. The Mad Motley has a disclosure policy.
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