Key Points
Palantir has created substantial shareholder value after its huge rally over the last few years.
Shares remain expensive relative to earnings and growth.
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Palantir Technologies (NASDAQ: PLTR) was one of the technology industry's best performers in 2024 and 2025 as investors became optimistic about its decision to incorporate generative artificial intelligence (AI) into its existing data analytics platform. Shares have risen 1,666% over the last three years, likely minting plenty of millionaires and billionaires among the company's early backers.
But this year, Palantir's rally has stalled. Shares have already shed a tenth of their value year to date despite the company's improving operational results. Let's dig deeper to decide if the stock still has millionaire-maker potential or if it's time for investors to jump ship.
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What is behind Palantir's rally?
Since its founding in 2003, Palantir has made a name for itself in data analytics. The company's software helps corporate clients sift through vast amounts of unstructured data to identify actionable insights. This can include detecting fraud or unlocking efficiency gains in the private sector.
And in the public sector, Palantir's software quickly found often-controversial uses in law enforcement, military targeting, and immigration enforcement, especially during the first Trump administration.
The arrival of generative AI in 2022 took things to the next level. The company quickly realized the synergy between large language models (LLMs) such as Claude or ChatGPT and its existing data analytics software. It created a proprietary Artificial Intelligence Platform (AIP) designed to allow clients to securely integrate LLMs with their internal data, making the data dramatically easier to query and analyze.
AIP helps private businesses quickly detect threats or opportunities. Public sector clients can also benefit from its ability to give real-time insights during fast-paced law enforcement or military operations.
Palantir is already helping the armed forces of Ukraine and Israel with targeting. And it has recently signed deals with the U.S. Army and the North Atlantic Treaty Organization (NATO) to provide a platform for battlefield decision-making and awareness called the Maven Smart System.
Image source: Getty Images.
Business is booming
Palantir's recent hype goes far beyond a few favorable headlines. In fact, the launch of AIP seems to have supercharged its operational momentum. Fourth-quarter earnings were a slam-dunk success, with revenue soaring 93% year over year to $1.1 billion, driven by surging sales from U.S. commercial clients (up 137% to $507 million).
The company's brand was built around government contracting, but its work with businesses has become arguably more important. This trend is beneficial because it provides a much larger total addressable market, in the U.S. and internationally. However, it remains to be seen whether Palantir will be able to maintain its economic moat.
In the past, its ability to withstand bad press and political pressure has given it an edge over contractors like Alphabet's Google, which stepped away from certain military contracts over internal employee pushback. But this advantage will be less important in the private sector and could even be to the company's disadvantage if its work becomes too politically polarizing.
Palantir also has a questionable moat against competition from other data analytics companies like Microsoft and Snowflake that are also incorporating generative AI LLMs into their services.
Is Palantir still a millionaire maker?
On the surface, the company offers almost everything a growth investor could want. It provides cutting-edge technology to a vast addressable market, and sales are growing in the high double digits.
That said, an excellent company isn't always an excellent stock. With a forward price-to-earnings (P/E) multiple of 158, shares trade at a substantial premium over the S&P 500 average of just 22. And this leaves very little room for growth.
Palantir stock probably isn't a millionaire maker at current prices. And investors who still want to bet on the company should probably wait for a better entry point before considering a long-term position.
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Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Palantir Technologies, and Snowflake. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
