Palantir Technologies (NASDAQ: PLTR) has emerged as a leading artificial intelligence company, offering AI data analytics to the U.S. government and businesses. And the company is growing quickly, with sales rising 39% to $884 million and adjusted earnings increasing 63% to $0.13 per share in the first quarter.

That second figure is especially notable because many AI start-ups aren’t profitable, making Palantir an exception among many of its peers. Its success has helped propel the company’s share price to dizzying heights, gaining nearly 500% over the past year. But this rapid rise means that its stock is now extremely expensive, trading at a price-to-earnings ratio (P/E) of 574.

Paying such a high premium typically isn’t a wise decision. So, here are two other AI companies that are leaders as well, at a much lower premium.

Image source: Getty Images.

1. Nvidia

Nvidia (NVDA 1.67%) doesn’t need an introduction for anyone who follows the tech sector closely, but it’s worth highlighting some of the strengths of the company to show just how dominant it is in AI. Here are a few highlights:

• Its AI accelerators are in an estimated 70% to 95% of the world’s AI data centers.
• The company’s data center revenue spiked 73% in the first quarter to $39 billion and adjusted earnings rose 33% to $0.81 per share in the first quarter.
• Even with all of its growth, CEO Jensen Huang said that “Global demand for Nvidia’s AI infrastructure is incredibly strong.”

Its financial performance remains very strong, and the company has little competition in AI data center processors. While there have been some rumblings of tech companies backing away from spending in this category, a slowdown has yet to happen.

Data center spending will reach $1.1 trillion in 2029, double what companies were spending last year, according to the analysis website Network World.

It’s worth noting that Nvidia’s stock has a P/E of 46, which means it’s not necessarily cheap. Still, it’s far less pricey than Palantir, and the company arguably has a much bigger competitive moat in AI than Palantir does.

2. Microsoft

It’s easy to overlook Microsoft (MSFT 0.71%) because it has seemingly been around forever. But while younger AI companies may attract a lot of attention, Microsoft is already benefiting from AI and continues to be a leading player in cloud computing.

Its Azure cloud computing service now has a 21% market share in its market, making gains against Amazon, which holds 30% of the market. Cloud services sales spiked 35% in its fiscal third quarter (which ended March 31), showing that the company continues to find new ways to increase demand in this area.

And management wisely invested in OpenAI early, giving the company access to ChatGPT when it debuted. Since then, Microsoft has integrated the chatbot into many of its services, giving it an edge over other tech giants that are still trying to catch the AI wave (I’m looking at you, Apple).

That’s one of the reasons why the stock has jumped 42% over the past two years, while Apple’s has gained just 12%. With its early moves into AI coupled with the company’s strong cloud business, Microsoft is poised to continue benefiting as artificial intelligence expands. And with the stock having a P/E of just 36, it’s far less expensive than Palantir.

Palantir has a good product that is profiting from AI, but I think buying the company’s stock when it’s so expensive could be a mistake. There are plenty of other tech companies benefiting from AI with share prices that are far less frothy, with Nvidia and Microsoft being two of the best right now.