Palantir (PLTR) publicly challenged the Defense Intelligence Agency (DIA) over a program called MARS, the Machine-assisted Analytic Rapid-repository System. The DIA launched this program in 2018 to replace a Cold War-era data analytics system and has been trying to build the new platform largely in-house since then.
However, Palantir is saying that the DIA is wasting taxpayer money and violating procurement law by attempting to rebuild this system from scratch with unreliable results. It wants in on the action.
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Palantir is demanding the right to bid on modernizing the DIA's core data infrastructure, with the White House siding with Palantir by saying that the Pentagon should use the best private-sector tech available. The Trump admin expects "swift action to remedy this and ensure any company that wants to compete is given a fair chance."
www.barchart.comPalantir Is Targeting the Intelligence Agencies
One trend most investors in Palantir are familiar with is that once this company gets into an agency or an institution, it tends to scale rapidly inside it. If the DIA becomes a Palantir customer, you should expect Palantir to land significant business from it.
Palantir already has massive Pentagon business, plus a $10 billion tentative contract it got last year from the Army.
The DIA isn't as big as the Army, but if the Pentagon folds, it'll set a precedent for more deals and open more doors for Palantir. If Palantir can optimize and deal with the DIA's operations, the rest of the intelligence community may open up.
The DIA is one of 18 intelligence agencies that also face similar data issues, and Palantir could bid to address them.
For example, the CIA's venture arm, In-Q-Tel, was an original investor, and Palantir built Gotham with CIA input. If Palantir wins the DIA, it will almost certainly use that as leverage to deepen its CIA footprint for clandestine operations and all-source analysis.
A DIA win also gives Palantir a fresh case study to pitch to the NSA or the FBI on replacing legacy data architectures.
It's Unlikely to Help PLTR Stock Much
The AI rally has shifted into a coherent rally around the true beneficiaries of AI.
This means any random software company claiming to be an AI company is no longer going to have Wall Street clamoring to pay more for it.
Palantir obviously isn't a "random" software company, but it's definitely not really an "AI" company anymore, at least not in the eyes of Wall Street. And even if it was, it'd probably end up worse off.
The ongoing AI rally has coalesced around hyperscalers and whoever the hyperscalers are pouring money into. Everything else is on the periphery and isn't seeing a windfall. Thus, the easy gains have been made on PLTR stock.
Where I See PLTR Stock Going
Palantir actually trades richer than what your average AI hyperscaler or their supplier trades at. Stocks like Nvidia (NVDA) are trading at 20-30x forward earnings. PLTR stock is trading at 94x forward earnings with a significantly lower addressable market and often lower growth. This business is in a class of its own.
That's a problem in my eyes, and I believe it will keep PLTR stock constrained. I do not think PLTR stock will trade at triple-digit earnings for a prolonged period. This company is expected to keep beating earnings estimates by a wide margin, and these beats are now priced into the stock well before earnings.
Some analysts are switching into the “Buy” camp after PLTR fell from its peak and allowed earnings to catch up, but most bears are yet to be convinced.
www.barchart.comYou will likely see sideways trading or perhaps a stock that will keep up with the market, but I do not see the hype returning. AI hardware stocks are simply the better bet right now, since AI hardware is selling like hot cakes, and the companies making them don't have to chase around clients. It's the other way around for them.
On the date of publication, Omor Ibne Ehsan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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