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Should You Forget Palantir and Buy These 2 Artificial Intelligence (AI) Stocks Instead?
While it's well off its recent highs, Palantir Technologies (NASDAQ: PLTR) was one of the best-performing stocks in 2024 and early 2025. However, those gains have led to an extreme valuation, with the stock trading at a forward price-to-sales (P/S) multiple of 52 times 2025 analyst revenue estimates.The company has been seeing accelerating revenue growth, with revenue climbing 36% last quarter, led by a 64% jump in U.S. commercial revenue. The company's success stems from its focus on the application and workflow layers of artificial intelligence (AI). Palantir aims to become an AI operating system for its users, creating a platform that can help organizations run AI applications in a real-world environment. It has been highly successful in bringing in new commercial customers through its use of AI boot camps to train and onboard customers, and now it has a big opportunity as it moves these customers from proof-of-concept work into production. However, the company is very closely tied to the U.S. government, its largest customer which accounted for more than 40% of its revenue in the fourth quarter, and the government is currently undergoing massive cost-saving measures and slashing budgets. This includes the White House telling the Department of Defense to reduce its budget by 8% a year over the next five years. It's unknown whether Palantir will be helped or hurt by these DOD budget cuts, but it's a big risk. Continue reading
While it's well off its recent highs, Palantir Technologies (NASDAQ: PLTR) was one of the best-performing stocks in 2024 and early 2025. However, those gains have led to an extreme valuation, with the stock trading at a forward price-to-sales (P/S) multiple of 52 times 2025 analyst revenue estimates.
The company has been seeing accelerating revenue growth, with revenue climbing 36% last quarter, led by a 64% jump in U.S. commercial revenue. The company's success stems from its focus on the application and workflow layers of artificial intelligence (AI). Palantir aims to become an AI operating system for its users, creating a platform that can help organizations run AI applications in a real-world environment. It has been highly successful in bringing in new commercial customers through its use of AI boot camps to train and onboard customers, and now it has a big opportunity as it moves these customers from proof-of-concept work into production.
However, the company is very closely tied to the U.S. government, its largest customer which accounted for more than 40% of its revenue in the fourth quarter, and the government is currently undergoing massive cost-saving measures and slashing budgets. This includes the White House telling the Department of Defense to reduce its budget by 8% a year over the next five years. It's unknown whether Palantir will be helped or hurt by these DOD budget cuts, but it's a big risk.
