A little over 10 years ago, I had an unexpected experience on the metro in Washington, D.C., that changed my perspective on technology and investment.
While scrolling through my iPhone, I spotted a man focused on his laptop across from me. He wore a black winter beanie that read “Palantir.” This piqued my curiosity. I quickly searched for Palantir on Google.
I discovered that Palantir Technologies (NYSE: PLTR) is a data analytics software company specializing in technology for the U.S. military. Intrigued, I continued to track Palantir’s progress, particularly when it went public in late 2020. Fast forward to today, Palantir is now a significant player in the artificial intelligence (AI) sector. Below, I will explore AI’s growing influence in defense and explain why Palantir is a stock worth watching as military investment in technology increases.
The Growing Importance of Defense Technology
When you think of AI, workplace productivity, robotics, and drug discovery might come to mind. These applications often receive positive attention, leading to extensive coverage.
Conversely, the defense industry rarely garners the same enthusiasm. Even though government contracting is a colossal business, discussions around the military’s budget and operations are less common. Nevertheless, defense agencies, like any large organization, face similar challenges to private companies, including budget tracking, strict procurement, and resource management.
During times of geopolitical tension, the need for cybersecurity and data analysis becomes even more crucial. The capability to facilitate informed decisions quickly is essential. This is where Palantir plays a vital role.
Image source: Getty Images.
Major Achievements for Palantir
Throughout much of 2024, Palantir has quietly secured significant contracts with the Department of Defense (DOD). Major tech firms Amazon and Microsoft have recognized Palantir’s strength in the defense sector. Both companies have integrated Palantir’s Artificial Intelligence Platform (AIP) with their cloud services, Azure and Amazon Web Services (AWS), aimed at enhancing DOD security measures.
In early November, Palantir may have achieved its most significant contract yet with the military. According to public records, the Naval Information Warfare Center (NIWC) is set to award Palantir a contract valued at nearly $1 billion. The contract is intended for five years, with an estimated value of $920 million.
Image source: Palantir Investor Relations.
Palantir’s revenue from U.S. government contracts is already increasing at 40% annually, exceeding $1 billion each year. The new NIWC deal is likely to double their government revenue base, a substantial leap for the company.
Is It Time to Buy Palantir Stock?
While I am optimistic about Palantir’s advancements in defense technology, the NIWC contract alone isn’t a compelling reason to buy the stock at this moment. Palantir’s price-to-sales (P/S) ratio is currently 54.2, which is quite high. Recent trends indicate that the stock has seen considerable price increases, possibly leading to overvaluation.
PLTR PS Ratio data by YCharts
Despite my belief that the stock may be overbought, the broader context suggests AI is becoming increasingly important in military operations. Palantir seems well-positioned to continue expanding in this area, and I am hopeful about the company’s future role in AI-driven defense capabilities.
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John Mackey, former CEO of Whole Foods Market, now an Amazon subsidiary, is a member of The Motley Fool’s board. Adam Spatacco holds positions in Amazon, Microsoft, and Palantir Technologies. The Motley Fool has stakes in and recommends Amazon, Microsoft, and Palantir Technologies. They also recommend long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
