1 Billion Reasons to Love Palantir Stock Right Now

A little over 10 years ago, I encountered an interesting event on the subway in Washington, DC that changed my life.

While I was mindlessly scrolling through my iPhone to pass the time, I noticed a man on the couch across from me, browsing with his laptop. He was wearing a black winter beanie with the word “Palantir” written on it. Wondering what this could mean, I went on Google and searched for Palantir.

unaware of me, Palantir Technologies (NYSE:PLTR) He was a data analytics software developer specializing in defense technology for the US military. I continued to follow Palantir over the years from then on, and was particularly excited when the company finally went public in late 2020.

Fast forward a few years and Palantir has now emerged as a major force. field of artificial intelligence (AI). Below I’ll explain how AI is making waves in the defense industry and why I see Palantir as a simple stock to watch as the military doubles down on defense technology.

Why is defense technology so important?

When it comes to AI, you’re probably thinking of applications related to workplace productivity, robotics, and even drug discovery capabilities. The subtle thing about use cases like this is that they tend to be seen in a positive light. In other words, people like to talk about them and therefore they get a lot of news.

The defense industry is different. Although it’s pretty well known that government contracting is a huge business, I think it’s fair to say that most people try to avoid talking about the business side of the military. But the reality is that the federal government (including the Pentagon) has the same needs and pain points as a private company. Like any organization, defense agencies keep track of budgets, go through long and stringent purchasing processes, and must keep track of things like headcount and inventory.

In times of geopolitical unrest, the importance of cybersecurity and data analysis becomes even more evident; because providing the necessary tools to make informed decisions quickly and efficiently is a critical task. This is where Palantir comes into play.

Image source: Getty Images.

Another big win from Palantir

For most of 2024, Palantir has quietly announced a series of big announcements. A contract was signed with the Ministry of Defense (DOD). Megacap tech giants Amazon And Microsoft They recognized Palantir’s strong presence in the defense sector and both companies integrated Palantir’s Artificial Intelligence Platform (AIP) with their cloud infrastructures, Azure and Amazon Web Services (AWS). These partnerships focus on improving security protocols within the Department of Defense.

But in early November, Palantir may have scored its most lucrative victory yet over the military. The Naval Information Warfare Center (NIWC) appears likely to award Palantir a contract worth approximately $1 billion, according to public records. The Navy Department “intends to award a contract to Palantir on a sole source basis,” the statement said. The deal will last five years and have an estimated value of $920 million.

Image source: Palantir Investor Relations.

Palantir’s US government revenue is currently growing 40% year over year, generating more than $1 billion in annual revenue. It turns out the company essentially doubled the U.S. government’s revenue base thanks to the NIWC agreement.

Are Palantir shares a buy right now?

While I’m excited about the progress Palantir is making in the defense technology space, I have to say that’s not the only reason for NIWC to buy shares in the first place. Palantir sale price (P/S) multiple of 54.2 is abnormally high and trends suggest the stock is experiencing some distinct experiences valuation expansion in recent times.

PLTR PS Ratio data Y Charts

While I think the shares are overbought and too expensive to buy right now, the gist is that AI is a growing theme in the military. To me, Palantir looks well-positioned to continue entering this space, and I’m optimistic that the company will continue to be a major player in terms of AI-enabled defense capabilities.

Should you invest $1,000 in Palantir Technologies right now?

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John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a board member of The Motley Fool. Adam Spatacco He holds positions at Amazon, Microsoft and Palantir Technologies. The Motley Fool has positions in and recommends Amazon, Microsoft and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a feature disclosure policy.