Why Is Wall Street Obsessed With AI (Artificial Intelligence) Leader Palantir?

Key Points

• Palantir stock trades at an astronomical P/E ratio.

• Investors see a huge growth opportunity in this relatively small company.

• 10 stocks we like better than Palantir Technologies ›

Investors have gone wild over data analysis company Palantir Technologies (NASDAQ: PLTR). Palantir stock has already more than doubled this year, and it's up nearly 1,500% over the past three years.

It continues to rise despite an astronomical valuation that also keeps climbing. At today's price, it's trading at a price-to-earnings ratio of 660. Here's why investors are keep pushing it higher.

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Niche AI services

Artificial intelligence (AI) is the biggest trend in the markets today, and with so many companies providing exposure to it in different ways, it can be challenging to parse the best AI stocks to buy. What appeals to many investors are huge growth opportunities and technology that provides a moat. That's where Palantir comes in.

Some of the large AI companies like Nvidia and Amazon are already so big that it's debatable how much bigger they can get. Stocks generally move on growth, and the larger the foundation, the harder it is to increase it in percentages. Finding a younger company with growth prospects that can still move the needle can be much more attractive to growth investors.

Palantir provides an AI platform that organizes data, connecting data from different places to simplify complex operations. Its original product was built for government clients, but it now has a product for commercial use as well, which is growing quickly.

Its government and defense contracts give it stability and create a high barrier to entry, while the commercial platform in the U.S. is growing at a faster pace -- up 71% year over year in the 2025 first quarter, outpacing total company revenue growth of 39%. As more companies see the benefits of using AI, this segment has a long growth runway.

With total company revenue of only $3.1 billion over the trailing 12 months, Palantir could continue to enjoy high and profitable sales growth for many years, with a stock gain to match. That's something for investors to get excited about.

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

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Jennifer Saibil has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.