Why Shares of Palantir Are Rising Today

Shares of Palantir Technologies (NASDAQ: PLTR) traded nearly 3% higher as of 10:55 a.m. ET today. The U.S. Department of Defense (DoD) yesterday announced it has awarded Palantir a contract modification to increase potential spending on work Palantir is currently doing with the Army.

Increased spending from the Pentagon

The DoD said it awarded Palantir a $795 million modification for its Maven Smart System software licenses, with an expected completion data of May 28, 2029. According to SpaceNews, the contract for Palantir's Maven Smart System had a ceiling of $480 million one year ago. With the $795 million increase, the Pentagon may spend nearly $1.28 billion on artificial intelligence (AI) for the Army by 2029.

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Palantir has been working with the DoD since 2017 to help the department improve the sharing of information between its various departments through AI-enabled awareness, global integration, logistics, and targeted workflows, among other solutions. The company can gather massive amounts of data from different sources, including satellites, drones, and various sensors, and then analyze the data and make suggestions in real time for how to approach various situations.

Palantir has impressed investors with its ability to keep securing government contracts and funding, despite much discussion about government spending cuts this year. However, it looks like the Trump administration will look to keep the defense base budget flat in fiscal year 2026.

Palantir continues to defy gravity

Palantir is now up 66% this year and has absolutely crushed the market. The stock seems to have no limit and now trades at 214 times forward earnings. Given the company's traction and how well the stock has performed in the face of many challenges this year, Palantir's technology appears to be very impressive and a leader in AI analytics and decision-making.

That said, I just don't buy stocks at these kinds of valuations.

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Bram Berkowitz 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.