Palantir has been on a contract-winning spree lately. Just last week, the company won a $618.9 million contract with the US Army, together with some good news from the US Special Operations Command. One of the common criticisms of the company in the past was related to its over-reliance on government deals. The company has since then diversified into commercial customers, which is growing at a healthy pace.
The over-reliance on the US government may have been viewed negatively in the past, but because we’re on the brink, if not already into, a global AI arms race, Palantir may well be best suited to help the US government win the race. The company is now teaming up with Anduril, a defense technology company specializing in autonomy and AI. The partnership aims to bring more innovative tech companies like SpaceX, OpenAI, Saronic, and Scale AI together to form a consortium. This consortium would then bid on US government contracts together, thus improving its chances of defeating the traditional defense contractors that have dominated in the past.
Currently, the US defense deals are dominated by Lockheed Martin, which also runs the most expensive program in US history, the F-35 Joint Strike Fighter Program. The total cost of the project through its full lifecycle is estimated at $2 trillion! Companies like RTX, General Dynamics, and Northrop Grumman also dominate the arena. But how are these companies adjusting to the modern demands of integrating AI into the defense system?
The US government has already increased its AI spending. But the important question is whether it trusts the traditional defense contractors to up their AI game. Or will it go with the tech disruptors of our time and use pure AI companies to develop its military AI programs?
There is a good chance that the US government goes with pure plays like Palantir. And this is where the proposed consortium comes in. A combination of Palantir, SpaceX, Anduril, OpenAI, and Scale AI will give the US government the right tools to proceed with its AI ambitions. This could redefine how defense lobbying is done. Traditional defense contractors would need to spend more money integrating autonomy and AI into their hardware. This would mean they have less money for defense lobbying, especially at a time when the disruptors are teaming up against them. We believe defense lobbying is changing in front of our eyes and Palantir is leading the change. If successful, this would further cement its place as the go-to company for the US government, thus bringing in more revenue in the future. For Palantir, the reliance on government revenue may not be a bad thing after all.
Palantir is not on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 43 hedge fund portfolios held PLTR at the end of the third quarter which was 44 in the previous quarter. While we acknowledge the potential of PLTR as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as PLTR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
