Is Palantir Technologies a Once-in-a-Generation AI Stock?

Palantir Technologies (NASDAQ: PLTR) has been one of the hottest AI stocks over the past year and a half. Since the start of 2024, it's up over 700% and has risen over 80% in 2025 alone. Those are incredible returns in a short time frame, but many investors are convinced that Palantir can go higher from here. If it does, Palantir could be marked as a once-in-a-generation AI stock.

So, does Palantir fit the criteria to become a once-in-a-generation stock, or is something else happening here?

Image source: Getty Images.

Palantir's business has rapidly expanded over the past year

Palantir's business is split into two primary units: Government and commercial. Palantir originally started as a software intended for government use and saw tremendous success in this field. However, use cases were developed for commercial products, and Palantir has also successfully expanded into that world.

Its software is all about data analytics and giving its users actionable insights based on its information flows. This is all powered by AI and has transformed how some businesses operate.

Palantir has seen success in its financials, with impressive growth accelerating quarter after quarter. In Q1, Palantir's U.S. commercial revenue rose 71% year over year to $255 million, and U.S. government revenue rose 45% year over year to $373 million. However, overall commercial growth was 33% to $397 million. This clearly indicates that other areas of the world (namely Europe) aren't embracing AI as much as the U.S. is. However, that could quickly change as several positive developments have been rolling out AI in Europe over the past few weeks.

Should Europe more widely adopt AI, that could boost Palantir's commercial sales to even higher levels.

Overall, government revenue rose 45% year over year to $487 million, so governments around the globe are adopting AI just as fast as the U.S. government is.

Palantir's total year over year growth was an impressive 39%, and management gave guidance for a 38% growth rate in Q2. However, that figure should be taken with a grain of salt, as management consistently beats its own expectations.

While this all sounds impressive, investors should be alarmed by Palantir's growth in conjunction with its valuation.

Palantir's stock comes with a hefty price tag

As mentioned above, Palantir's revenue rose 39% year over year in Q1, yet the stock is up over 700% since the start of 2024. That indicates that the stock far exceeds actual business growth, which shows up in Palantir's valuation.

PLTR PS Ratio data by YCharts

Palantir has risen from a stock that traded in the 10 to 20 times sales range (normal for a software company) to 110 times sales, a level that few stocks ever trade at. That's because the expectations are unbelievably high at these levels, and it's unlikely that Palantir will be able to live up to them.

To illustrate, let's make a few assumptions:

• Palantir's revenue growth accelerates to 50%, maintaining that level for five years.
• Palantir's profit margins reach industry-leading 30%
• Palantir's share count doesn't rise (a terrible assumption; its share count is up 7% year over year).

Should all three occur, Palantir's revenue and profits will rise from $3.12 billion and $571 million, respectively, to $23.7 billion and $7.1 billion. If it did that, Palantir would undoubtedly be a once-in-a-generation company.

However, at today's current market cap and five years from now's profits, Palantir's stock would trade at 46 times earnings, which is still quite expensive. For reference, Nvidia (NASDAQ: NVDA) grew revenue at a 69% pace in Q1 and trades for 46 times earnings right now.

This tells me that there's almost no upside left in Palantir's stock besides what's driven by hype. Palantir's stock has run up too far, too fast, and is now in a precarious situation. While Palantir could be a once-in-a-generation company (its business is fantastic), the stock is incredibly overvalued. It could be prone to a drastic sell-off if Palantir has a slip-up in execution.

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Keithen Drury has positions in Nvidia. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.