Palantir has been making headlines recently for its massive 60% stock surge since early November, outperforming even Tesla’s impressive growth. What’s driving this remarkable climb? A lot of it has to do with the company’s close ties with the U.S. government, particularly in defense and national security. Palantir’s AI-driven software has been instrumental in areas like counter-terrorism, law enforcement, and even immigration enforcement—areas where the Trump administration has focused much of its energy.
This has fueled a lot of speculation that Palantir is well-positioned to benefit from the Trump administration’s defense spending and national security agenda, which has created a lot of buzz among investors. For instance, Palantir recently secured a $480 million contract for Project Maven, a military AI initiative aimed at identifying military targets. And with defense and security expected to get more funding under the Trump administration, Palantir’s stock has seen a significant boost.
However, there’s more to the story than just government contracts. Palantir has also been expanding its footprint in the private sector, securing major contracts with big names like BP, CVS Health, and Rio Tinto. The company’s shift into the commercial space has helped grow its revenue significantly, with 35% of its revenue now coming from private sector clients. The AI boom, driven by tools like OpenAI’s ChatGPT, has only added fuel to the fire, giving Palantir’s software even more widespread appeal.
But here’s the catch: despite its impressive growth, Palantir’s stock is trading at extremely high multiples, with a price-to-earnings (P/E) ratio of 138x for 2025 earnings. For context, Snowflake, another growth stock in the AI and data analytics space, trades at just 12x revenue, and even Nvidia, which is leading the AI charge, is valued at 50x earnings.
Palantir’s price-to-sales (P/S) ratio is also concerning—at a massive 59.44, it’s higher than any other major software company, even surpassing Microsoft, Cisco, and Amazon at the peak of the dot-com bubble. This raises the question: Is Palantir’s stock price justified by its growth potential, or are investors overestimating the company’s future prospects?
With its deep government ties, expanding commercial business, and leadership in AI, Palantir certainly has a lot going for it. But with such steep valuations, it’s important for investors to carefully consider whether this stock is truly worth its price or if it’s due for a correction.