Palantir Led the Market in 2024, but Can Shopify and Arista Networks Steal the Crown?

Palantir Technologies dominated the S&P 500 in 2024, riding a wave of investor enthusiasm for artificial intelligence. The company’s shares skyrocketed by 340%, boosting its market capitalization to $163 billion as of January 20. But Wall Street analysts believe two contenders—Shopify and Arista Networks—might surpass Palantir’s valuation by 2025. Let’s take a closer look at their cases.

Shopify’s E-Commerce Empire Continues to Expand

Shopify’s growth story has been remarkable, driven by its innovative approach to simplifying commerce. The company ended the third quarter of 2024 with revenues up 26% year over year, reaching $2.1 billion. Subscription software and merchant services both saw robust growth, and non-GAAP earnings soared by 46% to $0.35 per diluted share. Investors are watching closely as the company targets similar gains in the fourth quarter.

Why Shopify Stands Out

At its core, Shopify helps merchants manage sales across digital and physical channels from a single dashboard. Its services extend far beyond sales, covering payments, marketing, logistics, and even cross-border commerce. The company’s commitment to innovation has earned it accolades: International Data Corporation named Shopify the market leader in e-commerce platforms for mid-market businesses, and Forrester Research highlighted its leadership in business-to-business (B2B) e-commerce.

B2B commerce, often overshadowed by retail, is a massive market. It’s three times the size of retail e-commerce and growing nearly twice as fast. This positions Shopify for long-term success, especially as it continues to build its AI capabilities.

AI as a Growth Driver

Shopify Magic, a suite of AI tools, is another feather in the company’s cap. These tools help merchants streamline tasks like creating storefronts, generating product images, and writing product descriptions. Anthony Chukumba at Loop Capital expects these features to drive significant revenue growth without a proportional increase in operating expenses.

Wall Street analysts anticipate Shopify’s earnings will grow at 25% annually through 2025. While its valuation—currently 90 times adjusted earnings—looks steep, Shopify has consistently outperformed earnings estimates, averaging 22% above consensus in recent quarters. If this trend continues, Shopify could surpass Palantir’s market value by 2025, with analysts projecting a price target of $140 per share, representing 36% upside from its current level.

Arista Networks: The Undisputed Leader in High-Speed Networking

Arista Networks also delivered an impressive performance in 2024. The company reported third-quarter revenue growth of 20%, reaching $1.8 billion, and non-GAAP earnings growth of 31% to $0.60 per diluted share. Looking ahead, Arista has already provided guidance that exceeds Wall Street’s expectations, forecasting revenue growth of 16% in 2025.

Dominance in Data Center Hardware

Arista’s leadership in high-speed Ethernet switches—a critical component for data centers—sets it apart. The company controls 43% of the market for 100G, 200G, and 400G Ethernet switches, a market segment where its closest competitor, Cisco, holds just 10%.

This dominance is no accident. Arista’s software-centric strategy simplifies network maintenance with a unified operating system across all its products. By contrast, legacy vendors like Cisco rely on multiple operating systems, adding complexity and cost.

The AI Connection

The surge in AI adoption has driven demand for high-speed networking solutions, and Bloomberg predicts this demand will increase fivefold by 2027. Arista is perfectly positioned to benefit, thanks to its durable competitive advantage in both hardware and software.

Wall Street expects Arista’s adjusted earnings to grow at 12% annually through 2025. Although its valuation—56 times adjusted earnings—might seem pricey, the company has consistently beaten earnings estimates by 14% on average over the last four quarters. With a price target of $135 per share, Arista could easily eclipse Palantir’s market value by 2025.

Comparing the Contenders

Both Shopify and Arista Networks bring unique strengths to the table. Here’s a quick comparison:

The Analyst Outlook

Analysts see significant upside for both companies:

• Shopify: Loop Capital’s target price of $140 implies a 36% upside.
• Arista Networks: Goldman Sachs’ target price of $135 implies a 13% upside.

With these growth rates and market dynamics, it’s no wonder investors are considering these stocks as serious contenders to surpass Palantir’s valuation.

What It Means for Investors

Palantir may have captured the spotlight in 2024, but Shopify and Arista Networks are making compelling cases for 2025. Both companies are leveraging innovation to tap into high-growth markets, and their strong track records suggest they could exceed Wall Street’s expectations. For investors, the choice comes down to their confidence in these companies’ ability to deliver on ambitious forecasts.