Key Points

Palantir continues to perform nearly flawlessly, but the market is worried about how the rise of agentic AI will impact SaaS stocks.
Sandisk is one of the only producers of critical memory products for data centers.

Palantir Technologies (NASDAQ: PLTR) and Sandisk (NASDAQ: SNDK) are two incredibly popular artificial intelligence (AI) stocks. However, Wall Street is looking at them differently right now.

Palantir was a poster child stock for AI for years, and it gained 1,800% from 2019 through 2025. Sandisk was not publicly traded as a separate company during most of the AI era, until February 2025, when it was spun off from Western Digital. Since then, it has gained an astounding 3,800%.

Both of these companies are reporting incredible growth, but while Sandisk stock soared after its latest earnings report, Palantir stock dropped. Here's why.

Image source: Sandisk.

Why Palantir stock dropped

Palantir has many qualities that have made it an outstanding company and a fantastic stock to own over the past few years. It has a proprietary AI platform that unifies information from disparate silos for government and commercial clients, providing data analysis and insights, and helping leaders make informed, data-driven decisions.

There are several ways Palantir goes beyond being another AI platform. It sends in trained specialists to work with clients, and helps them embed the platform throughout their organizations. Between its long-term contracts with clients and its success at deeply integrating itself within their operations, it has erected a high barrier to entry for potential rivals.

It attracts new business all the time from clients eager to get the most out of their own data, and it continues to demonstrate robust growth. In the first quarter, Palantir's revenue increased 85% year over year, with a 104% increase in U.S. commercial businesses. Total contract value increased 61%, and adjusted operating margin was 60%.

However, Palantir has been one of the most visible victims of the market's revolt against software-as-a-service (SaaS) stocks.

The chief concern is that AI agents can be built to perform many of the tasks SaaS companies handle. This technology is poised to become widely used, and as a result, investors are worried that Palantir's moat is not quite as durable as it once appeared.

Palantir is also priced for perfection, making a share price drop almost inevitable. Its P/E ratio topped 600 last year; it is nearly impossible for any stock to sustain that kind of valuation for an extended period of time.

Why Sandisk stock is flying

Sandisk, on the other hand, operates in a different part of the AI space. It is one of the only companies that makes NAND flash memory, which is critical for data centers, and it has been able to raise the prices it charges because the entire memory market is in the midst of a period of high demand and short supply.

"NAND flash is emerging as the only economically viable solution to deliver the capacity, performance, and efficiency required to keep models accessible for real-time inference at scale," said CEO David Goeckeler.

It also recently changed its business model, locking large clients into long-term contracts. That move will help add stability and steadiness to what has historically been a highly cyclical, boom-and-bust business.

In Sandisk's fiscal 2026 third quarter (which ended April 3), revenue increased 251% year over year, and 97% sequentially. While the company is reporting growth in all of its segments, those fantastic results were driven primarily by the data center segment, where revenue increased 233% sequentially.

Sandisk is also highly profitable, and it has become more so as the memory shortage becomes more intense and its products grow more expensive. Operating income increased from just $2 million in the prior-year period to $4.2 billion in the fiscal third quarter.

Although Sandisk stock soared after its May 7 earnings report, it also started to drop in late June after it reached a lofty valuation of around 80 times earnings. It has since fallen back to a P/E ratio of about 47, and given back the lion's share of that post-earnings surge.

That means it is well-positioned to jump again if the company continues to report unceasing demand when it releases its fiscal fourth-quarter results on Aug. 5. By contrast, Palantir still has a lot to prove, trading at 149 times trailing-12-month earnings.

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Western Digital. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.