Palantir’s Artificial Intelligence (AI) Platform Soars. Is This the Stock’s Secret Weapon?

Palantir’s AI products have become an easy button for companies looking to integrate AI.

| More on:
An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.

Source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article first appeared on our U.S. website and was written by Keithen Drury. 

Palantir (NYSE: PLTR) has been around as an artificial intelligence (AI) software company for a while. It started back in 2003 as a platform to help government intelligence agencies process data better. More recently, Palantir has expanded outside its core market into the public sector. Palantir’s years of experience with AI, coupled with an impressive client list, gives credence to its product, but it also has a secret weapon that kick-started its growth, especially in the public sector.

Management has described the demand for this product as “unprecedented,” which has fired up investors about Palantir’s stock. So, what’s Palantir’s new product that has everyone buzzing?

Palantir’s AIP is a game changer

While hundreds of companies have AI models built to perform specific tasks, there aren’t many practical ways to integrate AI into a business’s inner workings. Furthermore, many companies are worried that if they integrate their data into third-party AI models, their data could become compromised.

That’s where Palantir’s Artificial Intelligence Platform (AIP) comes in. AIP allows users to easily develop various applications within a business that deploy AI in practical ways. Although the applications are practically endless, some use cases involve automating accounts payable, integrating consumer data with customer service teams, and resolving warranty claims.

AIP has been a huge success for Palantir, and it’s having the biggest effect on its U.S. commercial business. In Q1, Palantir’s U.S. commercial customer count rose 69% year over year and 19% quarter over quarter. Revenue from this segment was up 40% year over year to $150 million. But here’s the kicker: That revenue only came from 262 customers.

With relatively few clients subscribing to Palantir’s products, the runway for growth is massive. However, one caveat to that analysis is the software’s price. With 262 customers generating $150 million in quarterly revenue, the annual subscription price is an average of $2.29 million among that cohort. Few companies can afford to shell out that much each year for software, but with the power these AI models give businesses, the cost may be worth the price of admission.

But that’s only the U.S. commercial base. Currently, AIP hasn’t seen much government interest, but management believes that will change. Governments are doing their due diligence (as they should) before heavily integrating AI into their inner workings. Considering that U.S. government revenue made up more than 40% of Palantir’s total in Q1, it’s a massive opportunity.

But does all that translate into a stock that’s worth buying?

The stock already has success priced in

The market isn’t blind to Palantir’s top-tier AIP product and growth opportunities, so it’s not cheap. Although Palantir is profitable, its margins haven’t reached their maximum potential, so using a more traditional metric like the price-to-earnings (P/E) ratio isn’t applicable in this scenario. Instead, I’ll use Palantir’s price-to-sales (P/S) ratio to value the company.

At 24 times sales, Palantir is an expensive stock.

PLTR PS Ratio Chart

PLTR PS Ratio data by YCharts

While Palantir is growing at a healthy pace, whenever a company’s P/S ratio is above its revenue growth rate, that’s a red flag. However, if AIP starts to catch hold in the government division, its growth could rapidly accelerate and climb to a higher value than its valuation.

So, what should investors do? I think Palantir will be a massive winner from widespread AI adoption, but that success is already baked into the stock. If you want to own some Palantir shares, I don’t think there is anything wrong with that, but be aware that any slip-up in a quarterly earnings report could ignite a massive sell-off.

AIP is Palantir’s secret weapon in the AI arms race. The problem is that the weapon has become less secret, and the market has already priced in the success of that rollout.

Should you invest $1,000 in Enbridge right now?

Before you buy stock in Enbridge, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Enbridge wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Tech Stocks

Start line on the highway
Tech Stocks

Where I’d Invest $5,000 in Growth Stocks With Long-Term Potential Through 2030

DO you have $5,000 to invest to grow your wealth over the long term? These growth stocks could deliver strong…

Read more »

A shopper makes purchases from an online store.
Tech Stocks

Buy the Dip on the Return of Recession Stocks?

If a recession comes back, there are some stocks that could fair well afterwards. And this is one of the…

Read more »

data center server racks glow with light
Tech Stocks

April Opportunity: Where I’d Invest $7,000 in These 3 Tech Stocks Right Now

These tech stocks have solid growth potential and are trading at discounted valuation, providing a solid buying opportunity in April.

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

If I Could Only Buy and Hold a Single U.S. Stock, This Would Be It

You don’t need 40 different stocks to build wealth. A few good ones can boost your portfolio, and this U.S.…

Read more »

cloud computing
Tech Stocks

2 Top Canadian Information Technology Stocks to Buy Right Now

These two Canadian information technology stocks are bargains amid the downturn in the broader market for long-term investors.

Read more »

A microchip in a circuit board powers artificial intelligence.
Tech Stocks

The Only 2 AI Stocks You’ll Need for Long-Term Growth

Here are two top Canadian tech stocks that could help you benefit from surging demand for AI technology and infrastructure.

Read more »

calculate and analyze stock
Tech Stocks

The Canadian Stock I’d Buy Every Time it Takes a Dip

The tariff wars have created a buy-the-dip opportunity for value investors. Here is a Canadian stock that is a buy…

Read more »

jar with coins and plant
Tech Stocks

The Smartest Growth Stock to Buy With $1,000 Right Now

Here's a fundamentally solid, dividend-paying growth stock you can buy on the dip now to hold for the long term.

Read more »