Palantir Drops, Sandisk Soars: The AI Earnings Divide
💡 Key Takeaway
Palantir fell despite strong earnings due to valuation and SaaS disruption fears, while Sandisk surged on hardware demand and pricing power.
What Happened: Two AI Stocks, Two Different Reactions
Palantir Technologies (PLTR) and Sandisk (SNDK) both reported blowout earnings in 2026, but the market rewarded only Sandisk. Palantir's stock dropped despite 85% year-over-year revenue growth, while Sandisk soared on 251% revenue growth.
Palantir's first-quarter results were impressive: U.S. commercial revenue jumped 104%, total contract value rose 61%, and adjusted operating margin hit 60%. Yet the stock fell, reflecting investor concerns about its sky-high valuation and vulnerability to AI agents that could disrupt software-as-a-service (SaaS) business models.
Sandisk, by contrast, reported a 233% sequential surge in data center revenue. The company benefits from a supply-constrained NAND flash memory market, where it can raise prices. It also shifted to long-term contracts, adding stability to a historically cyclical business.
Sandisk's stock initially jumped after its May 7 earnings but later pulled back from a P/E of 80 to 47. Palantir still trades at 149 times trailing earnings, making it more vulnerable to sentiment shifts.
Why It Matters: Hardware vs. Software in the AI Race
The contrasting reactions highlight a key theme: hardware companies with tangible products and pricing power are currently favored over high-valuation software firms. Sandisk's NAND flash memory is essential for AI data centers, and its ability to lock in long-term contracts reduces risk.
Palantir's drop signals that even strong growth can't justify a P/E above 600 (as it was last year). The market is increasingly skeptical of SaaS companies that could be disrupted by AI agents, which can automate tasks traditionally handled by software platforms.
For investors, this suggests a shift in AI investing: companies with hard-to-replicate physical assets and pricing power may outperform those relying on software moats that AI itself could erode.
Sandisk's upcoming fiscal Q4 results on Aug. 5 will be a key test. If demand remains strong, the stock could rally again. Palantir needs to prove its moat is durable or grow into its valuation.
Source: The Motley Fool
Analysis generated by Bobby AI quantitative model, reviewed and edited by our research team. This is not financial advice. Always do your own research before making investment decisions.
Bobby Insight
Sandisk is the better buy now due to hardware moat and reasonable valuation.
Sandisk benefits from structural demand for NAND flash in AI data centers, pricing power, and a shift to long-term contracts that reduce cyclicality. At 47x P/E, it's more reasonably valued than Palantir at 149x. Palantir faces headwinds from AI disruption risk and an extreme valuation that leaves no room for error.
What This Means for Me
