SAP's Valuation Could Deliver Stronger Returns Than Palantir in 2026, Wall Street Suggests

The Valuation Puzzle Behind Two Leading AI Stocks

Palantir Technologies (NASDAQ: PLTR) has captured investor imagination with extraordinary growth momentum. CEO Alex Karp recently characterized the company’s revenue trajectory as “otherworldly,” and the numbers back this up—shares surged 135% last year. Yet despite this stellar performance, Wall Street maintains a cautious stance on the artificial intelligence software giant heading into 2026.

The contradiction is striking. Here’s what’s happening: analysts covering Palantir acknowledge the company’s impressive business fundamentals. The company’s Rule of 40 score of 114% stands virtually alone in quality metrics. New customer acquisition continues accelerating across both government and commercial sectors.

However, this growth story comes with a significant price tag attached.

Why Valuation Concerns Dominate the Palantir Conversation

Palantir’s forward price-to-earnings multiple sits at approximately 182—nearly unmatched in scope. Only Tesla (NASDAQ: TSLA) within the S&P 500 commands a higher earnings multiple. This means investors are paying an extraordinary premium relative to near-term earnings expectations.

Consider what Wall Street’s recent surveys reveal: of 25 analysts tracked by S&P Global covering Palantir in January, just four recommended buying the stock. The consensus 12-month price target suggests minimal upside—a low single-digit percentage gain from current levels.

This isn’t criticism of Palantir’s operations or innovation capacity. Analyst reports consistently affirm the company’s competitive positioning and market opportunity. Rather, the hesitation centers entirely on what investors must pay for access to that growth story.

To illustrate this tension, examine Palantir’s price-to-earnings-to-growth (PEG) ratio: 2.9. For growth stocks, a PEG ratio near 1.0 typically signals reasonable value. Palantir trades at nearly three times that threshold.

SAP Presents a Different Investment Equation

By contrast, the enterprise resource planning sector looks different through Wall Street’s lens. SAP (NYSE: SAP), the German software conglomerate, has attracted decidedly bullish sentiment from institutional analysts.

The consensus outlook suggests approximately 40% appreciation potential over the next 12 months. Among 15 S&P Global-tracked analysts covering SAP, 12 assigned “buy” or “strong buy” ratings. That’s an 80% bullish consensus—substantially higher than Palantir’s coverage.

What explains this enthusiasm? Again, valuation provides the primary answer.

SAP’s forward earnings multiple of 28.5 appears reasonable only in context. When analysts incorporate expected growth into their calculations, SAP’s PEG ratio lands at exactly 1.0—the mathematical sweet spot for growth stock valuations.

Additionally, SAP’s AI integration efforts are substantive though less publicized than competitors. The company has embedded agentic AI capabilities into its core platform and operates a sovereign cloud infrastructure for European Union customers. This positions SAP to capture the enterprise AI spending wave without the valuation premium that Palantir commands.

Evaluating Wall Street’s Two-Track Outlook

Palantir’s CEO pushed back against skeptics in his November 2025 shareholder letter, suggesting that outsiders struggle to grasp the company’s strategic significance and financial value. While that argument holds merit—growth companies are notoriously difficult to fairly value—the math suggests caution may be warranted.

When a stock requires perfect execution and accelerating growth rates simply to justify current pricing, downside risk increases materially. Palantir’s momentum is genuine, but momentum alone doesn’t guarantee returns that compensate for a 182x earnings multiple.

SAP presents a more balanced risk-reward profile. The company operates quality infrastructure software with proven revenue generation, genuine AI integration, and valuation metrics that don’t demand perfection.

The Bottom Line for 2026

Wall Street’s divergent views on these two AI-focused stocks reflect a fundamental truth about equity markets: price matters as much as quality. Palantir possesses superior growth dynamics and market positioning. However, SAP offers a more attractive entry point for investors seeking exposure to enterprise AI transformation without paying an extreme valuation premium.

The question for your portfolio isn’t whether these companies will succeed—but whether their current stock prices already reflect that success.