Can Palantir Stock Turn $5,000 Invested Today Into $100,000 in the Next Decade?

Palantir Technologies (NASDAQ: PLTR) has been one of the hottest stocks on the market in recent years. Its share price has soared more than 2,000% since January 2023, achieving a return that would have turned a $5,000 investment into $107,000 over that period.

Will Palantir shareholders see similar gains over the next decade? Here's what investors should know.

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Palantir is a leader in artificial intelligence and machine learning platforms

Palantir provides data analytics and artificial intelligence (AI) software that enables businesses to manage and make sense of complex information. Its platforms have applications across almost every industry. As an example, Archer Aviation recently adopted Palantir's Foundry and Artificial Intelligence Platform (AIP) products to improve its aircraft manufacturing capabilities, and the companies will collaborate to design critical aviation systems in the future.

Forrester Research recognized Palantir as a leader in AI and machine learning platforms last August, awarding its AIP product higher scores than similar tools from Alphabet's Google, Microsoft, and Databricks, a private company currently valued at $75 billion. The report highlighted differentiated software architecture as a key strength. "Palantir is quietly becoming one of the largest players in this market," wrote analyst Mike Gualtieri.

Palantir continued to show near-flawless execution in the first quarter. Revenue increased 39% to $884 million, marking the seventh consecutive acceleration (as shown in the chart below), due to particularly strong growth in the U.S. commercial and government segments. And non-GAAP (non-generally accepted accounting principles) net income increased 70% to $334 million. Management attributed the strong results to the demand for AIP.

Shown above is Palantir's quarterly revenue and non-GAAP net income. The percentages show year-on-year growth. Palantir's revenue growth has accelerate for seven consecutive quarters. Non-GAAP = non-generally accepted accounting principles.

Importantly, Chief Technology Officer Shyam Sankar told analysts on the first-quarter earnings call, "Our foundational investments in ontology and infrastructure have positioned us to uniquely deliver on AI demand now and in the years ahead." That is encouraging because International Data Corporation estimates AI platform spending will increase by 40% annually through 2028.

Palantir is the most expensive stock in the S&P 500 by a wide margin

Palantir must increase at least 20 times in value (equivalent to a 1,900% return) over the next decade to turn $5,000 into $100,000. As mentioned, the stock has already notched returns of that magnitude once, and it did so in much less time. Shares advanced by over 2,000% in the last 30 months.

It's worth noting that four companies in the S&P 500 achieved sufficient gains to turn $5,000 into $100,000 in the last decade, as listed below. Palantir is not included because the company did not go public until 2020.

• Nvidia: +26,530%
• Advanced Micro Devices: +4,790%
• Axon Enterprise: +2,180%
• Texas Pacific Land: +2,060%

However, Palantir's share price is unlikely to increase 20-fold during the next decade. I say that because the company is already worth $324 billion. Multiplying that by 20 would bring its market value to $6.5 trillion, which seems implausible, given that Microsoft is currently the world's largest company and its market value is just $3.5 trillion.

Additionally, Palantir stock would need to gain 35% annually over the next decade to achieve a total return of 1,900%. That seems particularly unlikely, considering shares already trade at a shockingly expensive 109 times sales. For context, the next-closest member of the S&P 500 is Texas Pacific Land at 35 times sales.

Consider this: Even if Palantir trades at 40 times sales in 10 years (which would still be the most expensive stock in the S&P 500 at current prices), revenue would need to increase by 49% annually during that period for the company to achieve a $6.5 trillion market value. Palantir's revenue increased by only 39% last quarter, so the odds of revenue growing at 49% annually for the next 10 years are remote at best.

Here's the bottom line: Palantir is executing on a tremendous market opportunity, but the current valuation is absurd. Personally, I think investors should steer clear of the stock at its current price, or at least keep their position sizing very small. At some point, valuation will matter, and Palantir shares could crash.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Trevor Jennewine has positions in Axon Enterprise, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Axon Enterprise, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.