A bit over 10 years in the past, I had a curious encounter on the metro in Washington, D.C., that ended up altering my life.
Whereas mindlessly scrolling on my iPhone to cross the time, I seen a person cruising on his laptop computer within the seat throughout from me. He was carrying a black winter beanie that mentioned “Palantir” on it. Interested in what it might imply, I went onto Google and looked for Palantir.
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Unbeknownst to me, Palantir Applied sciences (NYSE: PLTR) was an information analytics software program developer specializing in protection know-how for the U.S. navy. From that second on, I continued monitoring Palantir through the years and was significantly excited when the corporate lastly went public again in late 2020.
Quick-forward a couple of years, and now Palantir has emerged as a serious drive inside the synthetic intelligence (AI) realm. Under, I’ll break down how AI is making waves within the protection sector and why I see Palantir as a no brainer inventory to look at because the navy doubles down on protection tech.
In terms of AI, you in all probability take into consideration purposes associated to office productiveness, robotics, and even drug discovery capabilities. The refined factor about use instances like these is that they are usually considered in a optimistic mild. In different phrases, folks take pleasure in speaking about them and due to this fact they find yourself getting numerous protection.
The protection trade is completely different. Whereas it is fairly well-known that authorities contracting is a gigantic enterprise, I feel it is truthful to say that most individuals attempt to chorus from speaking concerning the enterprise aspect of the navy. However the truth of the matter is that the federal authorities (together with the Pentagon) has most of the identical wants and ache factors as a personal company. Similar to any group, protection companies maintain observe of budgets, endure lengthy and strict procurement processes, and have to watch issues comparable to headcount and stock.
Throughout instances of geopolitical unrest, the significance of cybersecurity and knowledge evaluation turns into much more pronounced — because it’s mission-critical to supply the instruments required to make knowledgeable choices rapidly and effectively. And that is the place Palantir enters the image.
Picture supply: Getty Pictures.
Throughout a lot of 2024, Palantir has quietly introduced numerous massive contract wins with the Division of Protection (DOD). Megacap tech behemoths Amazon and Microsoft have seen Palantir’s sturdy presence inside the protection sector, and each firms have built-in Palantir’s Synthetic Intelligence Platform (AIP) with their respective cloud infrastructures, Azure and Amazon Net Providers (AWS). These partnerships are targeted on enhancing safety protocols inside the DOD.
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However in early November, Palantir could have simply secured its most profitable win but with the navy. In accordance with public data, the Naval Info Warfare Middle (NIWC) seems to be awarding Palantir with a contract price practically $1 billion. The discharge says the Division of the Navy “intends to award a contract on a sole-source foundation to Palantir.” The deal is for 5 years and has an estimated worth of $920 million.
Picture supply: Palantir Investor Relations.
Palantir’s U.S. authorities income is already rising 40% yr over yr and generates greater than $1 billion of income per yr. Now, it seems the corporate basically simply doubled its base of U.S. authorities income because of the NIWC deal.
Whereas I’m pumped about Palantir’s progress within the protection tech panorama, I’ve to say that this NIWC just isn’t motive alone to purchase the inventory hand over fist. Palantir’s price-to-sales (P/S) a number of of 54.2 is abnormally excessive, and tendencies counsel the inventory has skilled some pronounced valuation enlargement in current intervals.
PLTR PS Ratio knowledge by YCharts
Regardless that I feel shares have develop into overbought and the inventory is just too dear to purchase proper now, the larger concept is that AI is an evolving theme within the navy. To me, Palantir seems nicely positioned to maintain penetrating this area and I’m optimistic that the corporate will stay an essential participant for AI-powered protection capabilities.
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John Mackey, former CEO of Complete Meals Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of administrators. Adam Spatacco has positions in Amazon, Microsoft, and Palantir Applied sciences. The Motley Idiot has positions in and recommends Amazon, Microsoft, and Palantir Applied sciences. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
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