Is Palantir a Millionaire-Maker Stock?

Palantir Technologies (NASDAQ: PLTR) was one of big tech's top performers in 2025, with shares soaring 148% that year. And this followed an even more explosive showing in 2024 when it jumped 341%.

The artificial intelligence (AI)-driven data analytics giant has already minted boatloads of wealth for its backers. But does it have what it takes to maintain this millionaire-maker momentum?

Let's dig deeper to see what might come next.

Image source: Getty Images.

At the forefront of military modernization

The topic of military modernization came into the forefront with Russia's invasion of Ukraine in 2022. The conflict exposed the limitations of traditional battlefield technology and encouraged countries to adopt capabilities like drones and AI targeting. This trend has allowed Palantir to win a series of high-profile defense-related contracts.

Most recently, the company's Maven Smart System (MSS) was designated a program of record with the U.S. Pentagon. Maven is an AI-enabled military software solution designed to analyze battlefield data and help troops select targets for strikes -- similar to the services Palantir provides for the Ukrainian armed forces. And the new designation could help lock in Palantir's long-term role with the U.S. government.

Reuters reports that the MSS contract is worth $1.3 billion, and there is probably room for more growth, considering the war in Iran.

Palantir's growing adoption in the U.S. government will probably be good for the company's economic moat. Software-as-a-service (SaaS) contracts tend to be particularly sticky because of high switching costs.

Furthermore, the U.S. military industry supplies a huge network of allies. Palantir has already signed a partnership with the armed forces of Israel. And it has made inroads into Europe, with NATO acquiring the MSS last year.

Business is booming

Palantir's business is booming, with fourth-quarter revenue jumping 70% year over year to $1.4 billion. Perhaps surprisingly, more growth is now being driven by the company's growing popularity among American private-sector clients instead of the government, with U.S. commercial revenue jumping by an eye-popping 137% to $507 million.

Palantir's AI and data analytics software helps private-sector clients analyze their internal data to detect fraud, identify growth opportunities, and gain other actionable insights. The addition of AI-related functionality through Palantir's Artificial Intelligence Platform (AIP) in 2023 was a big inflection point for this business. Generative AI made the software easier to use because nontechnical users can perform queries with natural language instead of complex commands that require training.

Instead of designing its own large language models (LLMs), Palantir's AIP is designed to work with a variety of third-party algorithms developed by AI companies like Anthropic, Grok, and OpenAI.

This strategy obviously saves Palantir the cost and complexity of developing its own AI technology while also letting it keep up to date with the latest developments in the industry. That said, nothing is stopping other data analytics companies from pursuing a similar model. And investors should expect competition to rise over time.

So what's the catch?

On the surface, Palantir looks like a fantastic investment opportunity. The company is at the forefront of global military modernization, and private-sector clients are also rapidly adopting its software.

But the stock's sky-high valuation is still cause for concern. With a forward price-to-earnings (P/E) multiple of 115, shares trade for almost 6 times the S&P 500 average. And this suggests there is plenty of room for downside, just from hype fading -- even if the business continues to perform well.

Partisan politics are also a long-term risk. Much like Tesla CEO Elon Musk, Palantir co-founder Peter Thiel has been an outspoken backer of the Trump administration. And the company has played a role in controversial policies like immigration enforcement, which could bring negative attention or fewer contracts if political sentiment changes. Investors may want to wait on the sidelines for now.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and Tesla. The Motley Fool has a disclosure policy.