Palantir Stock Set to Join S&P 500 Amid AI Momentum

16 sept

Palantir Technologies (NYSE: PLTR) has been at the forefront of discussions among bulls and bears alike. With its inclusion in the S&P 500, the company's strides in artificial intelligence (AI) are now drawing more attention than ever. On the one hand, bulls point to improved profitability and its AI potential, while bears remain skeptical about whether the company's revenue growth will reaccelerate to justify its valuation.

Palantir’s AI Expansion
Palantir’s data analytics software has long been integral to government operations, particularly in intelligence gathering, counterterrorism, and military missions. However, in 2023, Palantir set its sights on the commercial sector, aiming to use its Artificial Intelligence Platform (AIP) to drive growth beyond government contracts.

The company's AIP is gaining traction. At its fifth AIP conference, over 100 organizations demonstrated their AI use cases, covering industries ranging from railroads to healthcare. Despite this momentum, some analysts express concerns over Palantir's high valuation, trading at 24 times 2025 estimated revenue. Bulls, however, see the potential of AI products to bring long-term growth, particularly with the company's recent defense contracts.

Palantir’s success in AI also extends to government projects. The extension of its Project Maven contract by the U.S. Army brings in about $90 million annually, and the Department of Defense's AI office awarded Palantir a five-year contract worth $480 million. Additionally, Palantir’s $178 million contract for Project TITAN showcases its role in the future of battlefield AI.

The company’s fundamentals remain strong, despite a deceleration in revenue growth. In 2023, Palantir grew its revenue by 17% year-over-year to $2.23 billion. The company generates around 60% of its revenue from government agencies, but with the commercial AI push, this balance may shift over time. It remains to be seen whether Palantir can continue to capitalize on its AI expertise in both sectors.

Technical Outlook
On the technical front, Palantir stock has been on a tear in 2024, up 107% year-to-date. Over the past three months, PLTR has formed a bullish reversal pattern, surging from its lows and gaining strong momentum as it approaches its S&P 500 inclusion on September 23. This event is expected to further drive institutional interest in the stock as mutual funds and large investors will be required to hold shares.

Palantir’s Relative Strength Index (RSI) stands at 72, indicating that the stock is in overbought territory. Despite this, the stock's bullish momentum shows no signs of stopping. On the daily price chart, a bullish harami pattern has emerged, signaling potential continuation of the uptrend.

The next key resistance level is set at $42, a target that aligns with the highs from June 2021. If Palantir can break through this resistance, the stock could set new all-time highs. However, with the RSI in overbought territory, a short-term pullback is also possible as investors take profits.

Palantir’s Accumulation/Distribution Rating of A reflects strong institutional buying over the past 13 weeks, further bolstered by its Composite Rating of 99 out of 99, signifying its overall strength in the market.

Conclusion
With Palantir set to join the S&P 500 and its AI ambitions expanding, the stock presents a compelling case for long-term investors. While valuation concerns linger, Palantir’s government contracts and AI-driven commercial growth provide a foundation for further upside. Technically, the stock is in a bullish reversal with momentum pushing towards a $42 target. However, investors should keep an eye on the overbought RSI and be prepared for possible short-term corrections.

Palantir remains a stock to watch, blending AI innovation with solid government partnerships to maintain its place as a leader in both sectors.