Is Palantir a Millionaire-Maker Stock After Its Rally?

Palantir Technologies (NASDAQ: PLTR) has been a winner for investors who bought the stock early in -- or prior to -- the artificial intelligence (AI) boom. The company offers government and commercial customers the ability to, through its software, immediately apply the power of AI to their needs. And they've flocked to this offering, sending revenue soaring in the triple digits.

As a result, investors piled into the stock, and it rose more than 1,200% in three years. Over the past year, Palantir's momentum slowed -- from a stock performance perspective -- even as earnings marched higher. This happened amid various headwinds for AI stocks, from concerns about tech companies potentially overinvesting in infrastructure to worries about the general economic environment.

But, in recent times, Palantir stock has recovered its momentum, rising more than 60% over the past three months. Is this hot AI stock a millionaire-maker after its rally? Let's find out.

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What Palantir does

So, first, let's take a look at Palantir's story so far. The company has been around for more than 20 years, and in its early days, it generated most of its growth through government contracts. Palantir offers software that aggregates a customer's often disparate data and uses it as a basis for making key decisions, developing new workflows, and much more.

A few years ago, Palantir developed a new product -- its Artificial Intelligence Platform (AIP) -- and this system incorporates generative AI and AI agents to take action and supercharge the power of a customer's data. And this coincides with a surge in demand from the commercial customer.

In fact, prior to AIP, Palantir had only a handful of U.S. commercial customers, yet as of the recent quarter, that number reached more than 650, a 35% increase year over year. In the period, U.S. commercial revenue showed that it's gaining on U.S. government revenue: The former climbed 149% to $764 million, while the latter advanced 90% to $809 million.

The reason for this shift? Companies and organizations are eager to put AI to use to solve their problems or generate growth. AIP allows them to do this easily and almost overnight. It represents a way to harness the power of AI right away and see results. Palantir also runs AIP boot camps, sessions that allow potential customers to actually see how the platform may help them. These have been very successful, with boot camp attendees often signing contracts in the days or weeks following their sessions.

Palantir's Rule of 40 score hits a new high

Importantly, Palantir also has expertly balanced growth with profitability, as we can see through its Rule of 40 score. A score of 40 or above is considered great; Palantir's has climbed quarter after quarter and reached 155% in the recent three-month period.

Meanwhile, demand is roaring higher, and that prompted Palantir to increase its guidance for full-year U.S. commercial revenue to more than $3.4 billion, representing 134% growth. And Palantir lifted guidance for full-year total revenue at the midpoint to more than $8 billion. That's an increase of 11 points, implying an 82% revenue gain and representing the company's biggest ever annual revenue guidance increase.

So, now let's consider our question: Is Palantir a millionaire maker after its rally? I don't think it's too late to buy Palantir after the recent gain, particularly since we're talking about long-term investing here. Investors who buy the shares today could be setting themselves up for a win over the coming five to 10 years if Palantir continues to generate growth and reach its goals.

AI is in the early days of its use in the real world, and customers clearly see the value of turning to Palantir for a solution that they can use and benefit from almost immediately.

That said, it's unlikely that Palantir, alone, would make an investor a millionaire. It's rare when one stock -- even a high-quality one -- will do the job. Instead, investors can greatly increase their chances of reaching the million-dollar mark by investing in a broad range of solid stocks and holding on for the long term. And as part of that portfolio, Palantir could be a valuable addition.

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