Forecast: This Lesser-Known Chance is Likely to Represent the Most Significant Aspect of Palantir's Operations in 2025
Forecast: This Lesser-Known Chance is Likely to Represent the Most Significant Aspect of Palantir's Operations in 2025
In the recent past, the chat was all about how large tech firms would revolutionize the world through artificial intelligence (AI). Among the prominent stocks, like Nvidia, Microsoft, Apple, Alphabet, Meta Platforms, Amazon, and Tesla, AI was identified as the upcoming megatrend, significantly contributing to their growth.
Yet, numerous contenders have risen to challenge big tech. Among these upstarts, data-analytics specialist Palantir Technologies (PLTR -0.42%) is proving its mettle and might endure in the long run, rivaling bigger corporations.
As of now, Palantir tops the performance list in the *S&P 500* for 2024. A significant part of these gains can be attributed to investor interest in Palantir's innovative software suite, referred to as the Artificial Intelligence Platform (AIP). Although AIP's adoption has grown remarkably over the past year, much emphasis has been put on its applications in the private sector.
In the following sections, I will uncover an unnoticed potential that Palantir is mastering, which is expected to play a crucial role in its growth in 2025.
Military AI is an untapped opportunity
For quite some time, investors have been informed that AI will drive increased productivity in the workplace and fuel revolutionary technologies, such as humanoid robots or self-driving cars. However, a domain that persistently gets overlooked is the role of AI in the defense sector, particularly in military operations.
Market research by Mordor Intelligence suggests that AI applications in the military encompass data analytics and robotics automation, resulting in an overall addressable market size exceeding $60 billion. Below, I will discuss some of Palantir's notable achievements in this sector.
Palantir is leading the charge
One aspect that adds to my confidence in Palantir's public sector operations is that the company collaborates with both government agencies and partners with other tech companies aiming to engage in defense operations. Earlier this year, Palantir teamed up with Microsoft to integrate AIP into Microsoft's Azure cloud infrastructure within secured environments across the Department of Defense (DOD).
More recently, Palantir entered into another partnership with a significant cloud provider, Amazon Web Services (AWS). This alliance represents another use case for Amazon's large language model (LLM) Claude, enabling integration with AIP across defense agencies.
Lastly, Palantir has joined forces with Meta. Similar to collaborations with Microsoft and Amazon, Meta will utilize Palantir's capabilities across its LLM (called Llama), aiming to establish a strong presence in the public sector.
A wealth of opportunities in store
Beyond partnering with major tech firms, Palantir has also secured several lucrative federal contracts in the recent past. Notable instances include a multiyear deal worth up to $100 million under Palantir's Maven contract, as well as a contract worth nearly $1 billion with the Naval Information Warfare Center (NIWC).
In addition to government-directed contracts, Palantir has also collaborated with intriguing entities outside the realm of large tech. For instance, the company recently announced an alliance with Anduril – a startup that develops autonomous systems, such as underwater drones. Additionally, Palantir also partnered with government consulting leader Booz Allen Hamilton.
The takeaway
Palantir has been an integral part of the public sector, especially U.S. government agencies, for some time. However, the numerous partnerships and contracts it has secured recently underscore the company's unrelenting progress. Moreover, the government's increasing investment in AI suggests that Palantir is likely to reap the benefits of such initiatives.
Palantir's U.S. government business may witness significant growth trends next year as its partnerships and contracts yield results.
It's worth noting that Palantir's expanding partnerships with tech giants like Microsoft, Amazon, and Meta could significantly boost its financing and investing opportunities in the defense sector. In fact, these collaborations could potentially funnel billions of dollars into Palantir's AI applications in the military.
Additionally, the untapped market of AI in military operations, valued at over $60 billion, presents a substantial financial opportunity for Palantir to invest and grow its business. With this in mind, smart investors may consider strategic investing in Palantir, given its strong position within the AI industry and its growing presence in the military sector.