Palantir Technologies shares surged on Tuesday, leading the S&P 500 higher after Ark Capital indicated that software companies could benefit from the growing AI boom. Rahul Bhushan, managing director of Ark Invest Europe, suggested in an interview with CNBC that data analytics and software firms like Palantir are poised to take AI market share from mega-capitalization tech giants such as Microsoft, Amazon, and Alphabet, which have been central in the emerging AI sector. According to Bhushan, AI-related infrastructure has accounted for 80% of value growth over the past two and a half years as investors pour money into shares of AI-related companies.
Ark Invest is now finding “far more asymmetrical opportunities” in companies operating further down the “AI stack,” including those providing software-as-a-service (SaaS) and platform-as-a-service (PaaS) products. Bhushan highlighted that data analytics providers like Palantir can offer customized data and AI services tailored to clients’ specific needs. As a result of these comments, Palantir shares rose more than 6% on Tuesday, resulting in an overall increase of about 140% in 2024.
Palantir’s stock surge is also fueled by its expanding role in AI, with strong government and commercial contracts driving investor optimism.
Palantir shares surge amid AI boom
The company’s “Artificial Intelligence Platform” (AIP), launched in 2023, is making strides across various industries, from defense to healthcare.
Palantir has seen strong growth in both government and commercial sectors, with contracts such as the U.S. Army’s Project Maven extension and a new $178 million contract for Project TITAN, both of which heavily rely on AI-driven battlefield intelligence systems. The Maven contract alone is estimated to bring in $90 million annually. Additionally, Palantir’s partnership with the Department of Defense’s Chief Digital and Artificial Intelligence Office (CDAO) for a $480 million contract further solidifies its leadership in defense-related AI applications.
Despite the recent surge in stock price, some concerns remain over Palantir’s valuation. The stock boasts a price-to-earnings (P/E) ratio of 243.82 based on trailing 12-month earnings, and its forward P/E stands at 99.01. While the company’s revenue for 2023 reached $2.23 billion, representing a 17% year-over-year increase, this growth has decelerated from previous years, with revenue growth rates of 24% in 2022 and 40% in 2021.
However, Palantir’s gross margin remains strong at 81%.
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