Palantir's AI Growth: How High Can the Stock Soar?

Palantir Technologies Inc. (PLTR) has been on a tear, with its stock price surging over 19% in after-hours trading following the company's impressive fourth-quarter earnings report. The artificial intelligence (AI) specialist blew past analyst expectations, reporting a 20% increase in revenue and its fifth consecutive quarter of profitability. But the question on investors' minds is: how high can Palantir's stock go?

Palantir's expansion into large language models and AI platforms has been a significant driver of its growth. The company's Artificial Intelligence Platform (AIP) has seen nearly 600 pilots in 2023, up from fewer than 100 in 2022. This expansion reflects both the strength of Palantir's software and the surging demand for AI platforms across industries and sectors.


The U.S. government's increased demand for AI technology has also played a crucial role in Palantir's success. The company's U.S. commercial revenue grew 70% year-over-year, driven by a 55% increase in customer count and a 107% increase in total contract value on a dollar-weighted duration basis. As the U.S. government continues to invest in AI for various applications, Palantir's expertise and offerings position it well to capitalize on this demand, driving its growth and stock performance.


Palantir's focus on commercial revenue growth has significantly contributed to its earnings beat. In Q4 2023, U.S. commercial revenue grew 70% year-over-year, driving overall revenue growth of 20%. This growth was supported by a 55% increase in U.S. commercial customer count, reaching 221 customers. The company's AIP rollout, with nearly 600 pilots in 2023, has fueled demand across industries.

However, maintaining this growth trajectory may face several challenges. Intense competition in the AI space from tech giants like Google and Amazon could pressure Palantir's market share. Regulatory risks, particularly around data privacy and security, may impact Palantir's ability to scale its platforms. Additionally, dependence on government contracts exposes Palantir to budget cuts or shifts in political priorities.

Despite these risks, Palantir's strong performance and expanding commercial customer base suggest it remains well-positioned for growth. The company's forward-looking guidance for Q1 2024 and the full year of 2024 indicates continued momentum, with expected revenue of between $612 million and $616 million for the first quarter and between $2.65 billion and $2.67 billion for the full year.


In conclusion, Palantir's AI growth has been fueled by its expansion into large language models and AI platforms, as well as the U.S. government's increased demand for AI technology. While challenges remain, the company's strong performance and expanding customer base suggest it is well-positioned for continued growth. As investors evaluate Palantir's stock, they should consider the company's growth prospects, competitive landscape, and regulatory risks. With a forward-looking guidance that indicates continued momentum, Palantir's stock may have further room to run.