A bit over 10 years ago, I had a curious encounter on the metro in Washington, D.C., that ended up changing my life.
While mindlessly scrolling on my iPhone to pass the time, I noticed a person cruising on his laptop within the seat across from me. He was wearing a black winter beanie that said “Palantir” on it. Inquisitive about what it could mean, I went onto Google and looked for Palantir.
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Unbeknownst to me, Palantir Technologies(NYSE: PLTR) was an information analytics software developer specializing in defense technology for the U.S. military. From that moment on, I continued monitoring Palantir over time and was particularly excited when the corporate finally went public back in late 2020.
Fast-forward a number of years, and now Palantir has emerged as a serious force inside the bogus intelligence (AI) realm. Below, I will break down how AI is making waves within the defense sector and why I see Palantir as a no brainer stock to look at because the military doubles down on defense tech.
In the case of AI, you almost certainly take into consideration applications related to workplace productivity, robotics, and even drug discovery capabilities. The subtle thing about use cases like these is that they have an inclination to be viewed in a positive light. In other words, people enjoy talking about them and due to this fact they find yourself getting plenty of coverage.
The defense industry is different. While it’s pretty much known that government contracting is an infinite business, I feel it’s fair to say that almost all people attempt to refrain from talking concerning the business side of the military. But the actual fact of the matter is that the federal government (including the Pentagon) has lots of the same needs and pain points as a non-public corporation. Just like several organization, defense agencies keep track of budgets, undergo long and strict procurement processes, and have to watch things corresponding to headcount and inventory.
During times of geopolitical unrest, the importance of cybersecurity and data evaluation becomes much more pronounced — because it’s mission-critical to offer the tools required to make informed decisions quickly and efficiently. And that is where Palantir enters the image.
Image source: Getty Images.
During much of 2024, Palantir has quietly announced a lot of big contract wins with the Department of Defense (DOD). Megacap tech behemoths Amazon and Microsoft have noticed Palantir’s strong presence throughout the defense sector, and each firms have integrated Palantir’s Artificial Intelligence Platform (AIP) with their respective cloud infrastructures, Azure and Amazon Web Services (AWS). These partnerships are focused on enhancing security protocols throughout the DOD.
But in early November, Palantir can have just secured its most lucrative win yet with the military. In keeping with public records, the Naval Information Warfare Center (NIWC) appears to be awarding Palantir with a contract value nearly $1 billion. The discharge says the Department of the Navy “intends to award a contract on a sole-source basis to Palantir.” The deal is for five years and has an estimated value of $920 million.
Image source: Palantir Investor Relations.
Palantir’s U.S. government revenue is already growing 40% 12 months over 12 months and generates greater than $1 billion of revenue per 12 months. Now, it appears the corporate essentially just doubled its base of U.S. government revenue due to the NIWC deal.
While I’m pumped about Palantir’s progress within the defense tech landscape, I even have to say that this NIWC isn’t reason alone to purchase the stock hand over fist. Palantir’s price-to-sales (P/S) multiple of 54.2 is abnormally high, and trends suggest the stock has experienced some pronounced valuation expansion in recent periods.
Regardless that I feel shares have turn out to be overbought and the stock is simply too pricey to purchase without delay, the larger idea is that AI is an evolving theme within the military. To me, Palantir appears well positioned to maintain penetrating this space and I’m optimistic that the corporate will remain a very important player for AI-powered defense capabilities.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Adam Spatacco has positions in Amazon, Microsoft, and Palantir Technologies. The Motley Idiot has positions in and recommends Amazon, Microsoft, and Palantir Technologies. The Motley Idiot recommends the next options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
