Can a $10,000 Investment in Palantir Technologies Turn Into $1 Million by 2035?

Palantir Technoligies (NASDAQ: PLTR) is one of the most popular artificial intelligence (AI) stocks on the market. The company is growing at an unbelievable pace and becoming one of the most practical ways for organizations to deploy new AI capabilities. It's heavily used by U.S. government agencies and business customers alike.

This has made investors incredibly bullish on the stock, but does it have the potential to transform an initial investment of $10,000 today into $1 million over the long term?

Image source: Getty Images.

100x returns may be out of the question

In most cases, when a stock provides a 100x return, it's doing so based on a starting point when the company was relatively small. Palantir is no longer such a company. It's currently carrying a market cap of $350 billion, so a 100x return would result in a $35 trillion company. That's more than all of the "Magnificent Seven" companies combined. So, I don't think Palantir can achieve this feat.

Another way we could assess Palantir's stock is to determine if it has achieved 100x returns since the AI race began in 2023. Its lowest valuation that year was $13.3 billion, so a 100x return would result in a $1.3 trillion company. That's a bit more reasonable to assess. But can Palantir deliver 4x returns over the next decade?

A lot of Palantir's success will hinge on how broadly adopted AI becomes. Right now, it's all the rage, but will it have the staying power it needs to continue being a technology that affects our work for decades?

I think it will, and the trillions of dollars being spent on AI infrastructure support that view. Palantir's platforms are some of the top ways to deploy AI in business, as they can help organizations automate decision-making based on the most up-to-date information possible. I think Palantir's expansion will continue, but the problem is a lot of its future expected success is already priced into the stock.

Palantir trades for a jaw-dropping 232 times earnings. A more reasonable price tag for a company growing this quickly would be about 40 times earnings.

For Palantir to achieve a $1.3 trillion market cap while also trading at that more reasonable P/E of 40, it would need to generate $32.5 billion in net income. Over the past four reported quarters, it generated $1.6 billion. So, for Palantir stock to rise to that level over the next decade, its earnings would need to grow at a compound annual rate of 35%.

Will that be difficult? Absolutely. Is it impossible? I don't think so. Palantir could return 100x from the start of the AI buildout in 2023 to 2035. It wouldn't be easy, but it's also not out of the question.

Keithen Drury 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.