Will Ebiefung, The Motley Fool
5 min read
With shares up by almost 700% over the last five years, Palantir Technologies (NASDAQ: PLTR) has been one of the biggest winners on the software side of the generative artificial intelligence (AI) megatrend. It has rapidly incorporated the new technology into its business model, leading to skyrocketing revenue and earnings.
That said, Palantir’s stock rally has slowed over the last 12 months, leaving investors wondering whether it can return to the explosive growth it enjoyed in previous years. Let’s dig into the pros and cons of the stock to decide what it might be worth by the end of 2027.
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Why Palantir?
Right now, AI-hungry investors are mostly limited to the infrastructure side of the opportunity. This is where hardware companies like Nvidia and Micron build the chips that data center providers use to run and train large language models (LLMs). However, many leading consumer-facing AI software leaders are still privately held, putting them out of reach.
Palantir convincingly bucks the trend. Its business involves sifting through vast amounts of its clients’ internal data to help them identify actionable insights like business trends, opportunities, and fraud. Generative AI proved highly synergistic with these tools, enabling operators to access insights via natural language prompts rather than advanced interfaces. Demand has been explosive.
Second-quarter revenue soared 93% year over year to $1.94 billion amid a surge of interest from U.S. commercial clients (which jumped 149%). American companies have shown a strong willingness to incorporate AI-related software into their operations. And Palantir is holding its own against industry rivals like Microsoft and Snowflake, which offer competing data analytics businesses.
Part of Palantir’s economic moat may stem from a reputation for security, born of its extensive work with high-profile government clients such as the CIA, NATO, and the Department of Defense.
It is also important to note that Palantir doesn’t design and train its own AI models. Instead, it has designed its artificial intelligence platform (AIP) to work with a variety of third-party APIs created by leading developers. This strategy allows the company to take advantage of the latest advances in the industry without dealing with the costs and complexity of developing its own LLMs from scratch.
