Most AI stocks are trading at nosebleed valuations in 2025, and if you are looking for an outlier, it is likely burning cash at an alarming rate and is profitable. Palantir (NASDAQ:PLTR) fits squarely into the former category, even though the stock has corrected significantly.
PLTR still trades at over 589 times earnings and at almost 100 times sales. It is a good speculative AI stock to buy, but it wouldn’t be fair to say it’s the best AI stock to buy right now. Waiting to buy the dip seems like a better idea as profit-taking takes place.
In the meantime, you could look into alternatives. One that is relatively similar to Palantir and is also in the AI business. Let’s take a look.
Booz Allen Hamilton (NYSE:BAH) went through a milder mania earlier and climbed all the way to $183.5, but it has declined 39% since then. The business is very similar to Palantir. Both companies are defense technology contractors with ties to the government and collaborate on strategic defense partnerships and AI integration. Both companies provide data analytics and tech tailored for U.S. national security. The difference is that Palantir focuses more on engineering and software, whereas Booz Allen Hamilton is more diversified. BAH also has slower growth, but considering the price, it’s worth looking into deeper.
The stock correcting is mostly due to an expected slowdown in organic growth from 11% to 8% in FY2026-2027, along with margins being range-bound across different sectors. However, the selloff seems overdone as this is a very profitable AI growth company.
It is one of the best profitable AI stocks to buy in 2025 as Q3 2025 revenue grew 13.5% to $2.9 billion and EPS of $1.55 exceeded analyst expectations. Net income increased 28.4% to $187 million and its backlog grew 14.8% to $39.4 billion. The backlog is why I think it is one of the best AI stocks.
Fiscal 2025 guidance was earlier raised to $6.25–$6.40 in EPS and $11.9–$12.0 billion in revenue. Plus, national security will always be the main focus of any administration. The market fretting about budget cuts is taking this stock down to deeply undervalued levels.
I believe BAH is indeed the best AI stock you can buy in the defense AI industry. The massive backlog here shouldn’t be ignored, and even if we look at an extremely bearish scenario where this backlog is halved, that’s still higher than its $14.2 billion market capitalization.
The selloff seems pretty irrational when you consider the long-term growth potential here. Possible Pentagon budget cuts seem more than priced in at this range. You are paying 17 times earnings and just 1.3 times sales.
BAH also has a dividend yield of 1.93%.
