Why Palantir Stock Bounced Back Today
Key Points
Google's entry into the defense AI market spooked Palantir investors Wednesday.
On Thursday, they're rethinking how big a threat Google really is -- if any.
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Defense and artificial intelligence stock Palantir Technologies (NASDAQ: PLTR) soared 9.1% through 10:10 a.m. ET Thursday on no obvious good news. Rather, investors appear to be reevaluating precisely how bad yesterday's news was -- and deciding it wasn't nearly as bad as it appeared.
Image source: Palantir.
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What happened to Palantir Wednesday
Shares of Palantir tumbled nearly 6% yesterday after tech giant Alphabet (NASDAQ: GOOG) (Nasdaq: GOOGL announced it will make its specialized "Gemini 3.8 Flash Cyber" AI model available exclusively to government buyers through a new initiative called the "Fairwind Program."
Gemini 3.8 Flash Cyber is described as a specialized artificial intelligence model built explicitly for cybersecurity, vulnerability detection, and automated patching, and of special interest to the U.S. military. As such, investors view it as a rival to Palantir's government security franchise and its profitable defense market.
What it means for Palantir stock
So far, so bad. This is a threat to Palantir's growth prospects -- but how big a threat remains to be seen. After all, Palantir's government contracting business grew 53% last year, and accelerated to 79% growth in the most recent quarter, according to S&P Global Market Intelligence data.
So Google isn't slowing Palantir down much yet.
That said, Investing.com argues investors have been looking for any excuse to sell Palantir due to "ongoing scrutiny over its high valuation multiples." And that's where I differ from the experts' analysis.
Priced north of 150 times GAAP earnings and close to 120 times free cash flow, Palantir stock may look expensive. But most analysts agree Palantir is on course to grow its earnings 54% annually over the next five years, and so far, Palantir isn't just meeting those targets. It's exceeding them. Meanwhile, Google's only growing at a sedate 15%.
I wouldn't count Palantir out of this race just yet.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Palantir Technologies. The Motley Fool has a disclosure policy.
