Coherent vs. Palantir: Which AI Stock Has More Upside Now?

Both Coherent Corp. COHR and Palantir Technologies Inc. PLTR are vital players in the AI space. While Coherent operates in the AI hardware infrastructure domain, Palantir prevails in the AI software and data analytics space, supporting the AI boom.

Let us delve deeper to find out which of these two stocks provides an upside for investors.

The Case for COHR

In the second quarter of fiscal 2026, Coherent derived 70% of its revenues from the Datacenter & Communications segment, highlighting its ability to ride the AI wave effortlessly. The explosive expansion of the AI space is assisting the company in paying out dividends, as evidenced by an 11% sequential and a 34% year-over-year hike in its top line during the second quarter of fiscal 2026. The company’s operational prowess is highlighted by a 147-basis-point year-over-year surge in the operating margin, a trait vital to sustain in the AI domain.

Coherent’s competitive edge lies in its product portfolio and a combination of vertical integration and U.S. manufacturing expansion. The company anticipates the primary revenue growth driver to be the rising demand for 1.6T and 800-gig transceivers. Also, the expansion of indium phosphide production across Sherman, TX, and Jarfalla, Sweden positions the company to benefit from the rising demand for AI.

COHR’s solid balance sheet positions it to make effective investments to take leaps in the AI domain. As of the end of the second quarter of fiscal 2026, COHR held $899 million in its cash chest against $106 million in current debt. It signals a strong liquidity position as evidenced by a current ratio of 2.25. While it held $3.2 billion in long-term debt as of the end of Dec. 31, 2025, a times interest earned of 2.5 highlights effective interest expense management.

The rising demand for AI infrastructure positions Coherent to gain an edge over its competitors. Swimming through this tide requires smart investments that the company can mobilize, as evidenced by its robust balance sheet. A strong product pipeline and scalable operations allow Coherent to cater to the AI demand and follow the growth trajectory in the long run.

The Case for PLTR

Palantir’s proprietary Foundry and Gotham platforms are at the apex of its AI strategy that promotes the swift adoption of AI across government and commercial sectors. PLTR’s AI Platform (AIP) supports these capabilities, allowing organizations to process large datasets and generate real-time insights. It is really valuable in areas that require extensive data integration, such as defense, healthcare, intelligence and finance, where operational efficiency and speed to make decisions are vital.

Palantir’s operations in the government sector involve an AI strategy with U.S. defense priorities. The high-profile initiatives, including the Department of Defense’s Open DAGIR project, reflect the ability to modernize military operations via AI-backed solutions where data interoperability and real-time decision-making capabilities are imperative, which solidifies the company’s position as an imminent player within the defense sector.

PLTR’s AIP boot camps have been successful at acquiring customers. These boot camps showcase the capabilities of the platform and display its adaptability across logistics, manufacturing and supply-chain management. The company’s core customer base harbors businesses seeking bespoke AI/ML services, mainly large government and corporate clients willing to invest in its systems. This enabled the company to witness solid revenue growth, seeing a CAGR of 23.8% from 2021 to 2025.

Despite Palantir’s strong standing in the AI industry, competition hampers its growth. Tech giants, including Microsoft and Google Cloud, are adding AI orchestration layers to their cloud services, which offer customers a simpler experience. We expect this competitive pressure to become a compelling force for investments that could create a disbalance between growth and profitability.

How Do Zacks Estimates Compare for COHR & PLTR?

The Zacks Consensus Estimate for Coherent’s fiscal 2026 sales and EPS indicates year-over-year growth of 19.4% and 52.7%, respectively. Eight EPS estimates increased over the past 60 days, with no downward revisions.

Image Source: Zacks Investment Research

The Zacks Consensus Estimate for Palantir’s fiscal 2026 sales and EPS indicates year-over-year growth of 11.5% and 26.4%, respectively. Ten EPS estimates increased over the past 60 days, with no downward revisions.

Image Source: Zacks Investment Research

COHR Trades Cheaper Than PLTR

Coherent is currently trading at a forward 12-month P/E ratio of 37.43 times, which is higher than the 12-month median of 27.44 times. Palantir is trading at 104.48 times, substantially lower than the 12-month median of 298.64 times. Coherent appears cheaper than PLTR.

P/E F12M

Image Source: Zacks Investment Research

Verdict: Add COHR to Your Portfolio

We recommend investors add Coherent to their portfolio now. The rising demand for its transceivers, with the soaring demand for AI, solid fundamentals and being undervalued, makes the stock appealing for investors who are interested in dipping into the AI domain.

In contrast, we suggest investors hold PLTR for now due to its steep valuation that leaves no room for errors. Moreover, competition is fierce, which could compel the company to make investments, hampering its growth and profitability balance. Hence, a cautious wait-and-watch approach should be put in place for Palantir.

COHR has a Zacks Rank #2 (Buy), whereas PLTR carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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