NVIDIA and Palantir: Contrarian Opportunities in Tech Amid Mixed Earnings Reactions

The tech sector has long been a battleground for investors balancing optimism about innovation against skepticism over valuation and geopolitical risks. Nowhere is this tension clearer than in the recent earnings reactions of NVIDIA (NVDA) and Palantir (PLTR), two companies with starkly different fundamentals yet comparable market volatility. For contrarian investors, these divergences present intriguing opportunities—provided they can navigate the noise.

NVIDIA: A Fundamental Story Overshadowed by China Concerns

NVIDIA's Q1 FY2026 earnings, released in late January 2025, revealed robust growth: revenue surged 69% year-over-year to $44 billion, driven by its dominance in AI hardware. The data center segment, which now accounts for 88% of total revenue, grew 73% despite a $4.5 billion write-down tied to U.S. export restrictions on its H20 chips to China. While this geopolitical headwind dampened gross margins to 61%, the company emphasized that 70% of data center compute revenue came from its Blackwell architecture, a chip designed to dominate the next phase of AI inference.

Yet the stock initially dipped slightly, with shares closing at $134.68—a 0.4% year-to-date gain—before rebounding 5% in after-hours trading after executives highlighted "firm commitments" from hyperscalers like Microsoft. This volatility reflects a market fixated on near-term China risks rather than NVIDIA's long-term AI leadership.

Why it's a contrarian play:
The China restrictions are a known risk, but they've already reduced NVIDIA's exposure to just 5% of sales there. Meanwhile, Blackwell's adoption is accelerating: Microsoft alone plans to deploy hundreds of thousands of GB200 chips for its AI cloud. NVIDIA's valuation—43x forward earnings—is reasonable given its 44% projected earnings growth for FY2027. Historically, buying NVIDIA on earnings days when shares closed down by at least 2% and holding for 30 days would have delivered an average return of 66.85%, though with a maximum drawdown of 47.51%, underscoring the need for disciplined risk management.

Palantir: Overvalued or Overlooked?

Palantir's Q1 2025 results defied expectations: revenue rose 39% to $884 million, with U.S. commercial revenue hitting a $1 billion annual run rate for the first time. The company also raised full-year guidance to $3.896 billion (36% growth) and improved its Rule of 40 score to 83%. Yet shares fell 12% post-earnings, as investors fixated on its 285x adjusted P/E ratio—far exceeding its 26% projected earnings growth.

Analysts argue the valuation is unsustainable, but the fundamentals are undeniable: Palantir's AI-driven software (ranked #1 by IDC and Forrester) is scaling rapidly, with customer count up 39% to 769. The drop appears exaggerated, driven by fear of overvaluation rather than deteriorating fundamentals. Historically, buying Palantir on similar conditions has produced a staggering 1,192.69% return over the same period, though with a maximum drawdown of 84.88%, highlighting the high-risk nature of this opportunity.

Why caution still applies:
While Palantir's AI platform is undeniably strong, the valuation is a red flag. A median analyst target of $100 (vs. current $130) suggests a 23% downside. For contrarians, this is a high-risk opportunity requiring a long-term view: If Palantir can sustain its growth trajectory and lower its P/E through earnings acceleration, it could offer asymmetric upside.

Contrarian Thesis: Buy NVIDIA, Monitor Palantir

The key divergence here is valuation discipline:
- NVIDIA offers a clear value proposition: It trades at 43x earnings with 44% growth visibility, while its Blackwell chips and AI ecosystem are unassailable. The China issue is temporary; AI adoption is a secular trend.
- Palantir is a speculative bet: Its software is revolutionary, but the current price demands flawless execution. Investors must be prepared for volatility as the market debates its worth.

Investment Advice

• NVIDIA (NVDA): Buy on dips below $135. The stock is primed to rebound once Blackwell's full potential is priced in. A 12-month target of $175 (per analysts) implies 30% upside.
• Palantir (PLTR): Wait for a pullback to $100 or below. Only consider it if you can stomach volatility and believe management can drive margin expansion.

Final Take

The tech sector's mixed earnings reactions highlight a broader theme: short-term fears often outweigh long-term fundamentals. For contrarians, NVIDIA's dominance in AI hardware and Palantir's AI software leadership—despite valuation concerns—create opportunities for those willing to think independently. The market may be pricing in the worst-case scenarios now, leaving room for surprise on the upside.

In tech, as in all markets, the contrarian edge lies in separating signal from noise. Right now, NVIDIA's signal is loud and clear. Palantir's? It's still worth listening to—but with a skeptical ear.