PLTR

Will Palantir Be a $1 Trillion Stock by 2035?

Palantir Technologies' (NYSE: PLTR) stock began a bull market run in early 2023 following the release of its artificial intelligence platform (AIP). Even though the company had long relied on AI to deliver analytical insights, the release of AIP appears to have placed the stock on investors' radar.

Although it was already a large-cap stock, the rise in the stock price took its market cap to just over $35 billion, and early findings from the company's AIP boot camps show it has the potential to drive game-changing levels of growth. The question for investors is whether this new growth rate can take the market cap of the AI stock to the $1 trillion mark by 2035.

Palantir's path to $1 trillion

At first glance, Palantir does not appear to have a likely path to a $1 trillion market cap by 2035. To reach that level over the next 11 years, the stock price has to increase by an average of at least 36% per year. Moreover, investors should not assume it will get there because of last year's stock performance. For those who may have not followed the company, Palantir stock rose by nearly 160% over the previous 12 months.

One year of strong performance is just that -- one year. Since its IPO in September 2020, the stock is only up by around 75% overall. While that outperforms the S&P 500's total return over the same time frame, it is not enough of an increase to fuel a run to a $1 trillion valuation.

The company's potential growth

While it is an improbable path, it isn't an impossible path for this growth stock. Despite a low probability of achieving 36% average annual growth, the prospect is not entirely out of the question, thanks to findings from its AIP boot camps. While discussions of the boot camps did not produce any results the company would release to the public, the potential benefits of its generative AI tool have drawn the attention of investors.

In the healthcare space, companies such as HCA Healthcare and the Cleveland Clinic applied AIP to dynamic scheduling to improve operational efficiency. In the technology sector, Panasonic uses AIP to scale its workforce, helping engineers level up at a faster pace. So high is the productivity increase that one company claimed to achieve more in one day than one of its hyperscalers had in four months. Such results, if they get scaled up, could supercharge revenue growth. The growth is already at 16% yearly in the first three quarters of 2023.

Moreover, Palantir has earned a profit in each of the last four quarters and reported more than $120 million in net income in the first nine months of the year. Given the potential for AIP, that profit should dramatically expand as more users capitalize on AIP's benefits. Also, with the possibility of such rapid earnings growth, Palantir's forward P/E ratio of 56 is unlikely to deter prospective bulls.

Will Palantir stock make it to $1 trillion?

Ultimately, Palantir faces a difficult path to $1 trillion by 2035. Even with the potential for AIP, whether the stock can return an average growth rate of 36% or more is unclear.

Nonetheless, investors should pay attention to Palantir's AIP and its massive potential for productivity gains. Even if the market cap falls short of the $1 trillion mark over the next 11 years, the stock should make investors significantly richer over time.

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Will Healy has positions in Palantir Technologies. The Motley Fool has positions in and recommends HCA Healthcare and Palantir Technologies. 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.

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