Why Is Palantir Stock (PLTR) Jumping Today?

Key Points

• The United Kingdom announced a significant partnership with Palantir to bring enhanced AI-powered capabilities to its military.

• The agreement includes a commitment from Palantir to invest up to $1.5 billion in the U.K. economy.

• Palantir's sky-high valuation continues to be a major point of concern.

• 10 stocks we like better than Palantir Technologies ›

Shares of Palantir Technologies (NASDAQ: PLTR) are jumping Thursday, up 4.1% as of 12:44 p.m. ET. The move comes as the S&P 500 gained 0.6% and the Nasdaq Composite gained 1.1%.

The United Kingdom government announced today it intends to partner with the AI-powered intelligence company to enhance its national security capabilities.

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Palantir is coming to the U.K.

After a potential deal was reported yesterday, this morning the U.K. officially announced an agreement that will see Palantir invest up to $1.5 billion in the country and "​​create up to 350 new high-skilled jobs, cementing the U.K. as a state-of-the-art defence technology hub."

Palantir has agreed to make the U.K. its "European HQ for defence" and will help develop AI-powered capabilities for the U.K. military. While the announcement focuses on the investment Palantir will make within the U.K., the company wouldn't agree to the partnership without the assurance that it would see a return through lucrative defense contracts.

Image source: Getty Images.

Beware the valuation

This will likely lead to serious revenue for Palantir in the years to come. However, the details of the agreement were light, and using the language of "up to $1.5 billion" leaves a lot of room for maneuvering. The real figures could end up being much more modest.

The fact remains that Palantir stock is wildly expensive. The company's price-to-earnings ratio currently sits north of 560. Its price-to-sales ratio is 123. These are astronomical.

I do not believe Palantir can justify its valuation, even with its continued success.

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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.