Palantir Isn't Just Riding the AI Boom-It's Orchestrating It

If nothing else, the bullish earnings reports from Palantir Technologies Inc. (NASDAQ: PLTR) have seemed to put to rest the arguments that Palantir’s growth is unsustainable. The company is now solidly profitable with revenue coming in from U.S. government contracts, and more importantly, from an expanding list of commercial customers.

However, like many technology stocks, Palantir’s growth was called into question due to concerns that the reality of the artificial intelligence (AI) boom wouldn’t measure up to its hype. This earnings season shows that the AI cycle is still in its early stages. No company brought that point home more than NVIDIA Corp. (NASDAQ: NVDA).

Palantir is the software “layer” that sits on top of the AI infrastructure boom that NVIDIA is monetizing at the chip level. The robust, some might say insatiable, demand for the company’s GPUs should give investors a strong signal that Palantir’s growth story still has a long way to go.

The Link Between NVIDIA’s Results and Palantir

NVIDIA provides the hardware that makes AI applications possible. The company’s recent earnings report reaffirmed that companies and governments are not only investing in AI; they’re doing so aggressively.

But there’s a difference between AI that’s possible and AI that’s useful. Every new AI cluster and large language model (LLM) needs a way to connect with real-world data, workflows, and decisions.

That’s where Palantir comes in. The company’s Gotham, Foundry, and AIP platforms help its customers turn that compute into actionable use cases. The company has drawn rave reviews from customers ranging from supply chains, fraud detection, logistics, healthcare, and of course, defense targeting. Palantir’s value proposition is that it works through the bottleneck of data and orchestrates the data, models, and human users into better decision-making.

Palantir Is Shaping the AI Wave

A common criticism of Palantir in its first few years of being a publicly traded company was that it was overly reliant on its U.S. government contracts. However, in recent quarters, Palantir has been growing its U.S. commercial revenue at triple-digit rates. In fact, commercial customers now account for about 45% of the company’s total revenue.

The company is adding customers at a breakneck pace. Much of that is due to the company’s go-to-market strategy of short AIP “boot camps” that quickly demonstrate the company’s value. The pace and the size of the deals have accelerated with AI-driven demand.

The combination of rapid and strong growth off a large base in a category that’s expanding is exactly what long-term investors should look for in a stock that’s likely to compound. Plus, Palantir’s software-first model is asset-light. This creates high gross margins and operating margins that continue to expand. It also means new revenue falls disproportionately to the company’s bottom line.

Is the Valuation Overhang a Real Concern?

Despite the bullish outlook for future growth, many analysts look at a forward price-to-earnings (P/E) ratio above 200x and believe that growth and more is already priced into the stock.

But in an AI-first world, a counterargument could be made that analysts are systematically undervaluing Palantir’s earnings power. For example, some analysts believe the company’s 2026 adjusted earnings per share (EPS) could be several times higher than consensus estimates. They also foresee accelerating international adoption (which has been a weakness) and operating margins between 45% and 50%.

Using those assumptions, PLTR stock would have a forward P/E between 20x and 40x. That’s still lofty, but in line with many high-quality software names that don’t match Palantir’s growth rate.

Is $150 the Floor for PLTR Stock?

On Nov. 21, PLTR stock closed around $154. In a short trading week marked by low volume, the stock has bounced higher. That means December will serve as confirmation of support at that level, or if the stock will continue to drop.

From its all-time high of around $207 to the closing price of $154, Palantir stock is down about 26%. That’s not unusual; in fact, the stock fell further earlier this year. A richly valued stock like Palantir will tend to have a sharp drawdown on bearish sentiment, regardless of its earnings.

However, those pullbacks have served as corrections inside a powerful uptrend that’s still being driven by strong and improving fundamentals. That story remains in place, which is why this pullback is a buying opportunity.

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The article "Palantir Isn’t Just Riding the AI Boom—It’s Orchestrating It" first appeared on MarketBeat.