Palantir Technologies (PLTR) shares continued their upward momentum Thursday after DA Davidson upgraded the stock to Buy, citing the company's growing role as an artificial intelligence orchestration platform that helps enterprises deploy AI models with flexibility. The stock rose over 4% in premarket trading, adding to an 8% gain from the previous session following the announcement of a strategic AI partnership with Nvidia aimed at U.S. government agencies.
DA Davidson raised its price target on Palantir to $175 from $165, implying nearly 40% upside from current levels. The upgrade from Neutral to Buy reflects the view that Palantir's valuation has become more justified as earnings and profitability accelerate. The company reported 68% revenue growth over the past 12 months, reaching $5.2 billion, while maintaining an industry-leading gross profit margin of 84%.
AI Orchestration as a Competitive Moat
According to DA Davidson, Palantir's key advantage lies in its ability to function as an orchestration layer that sits above multiple AI models, enabling customers to switch between underlying technologies without disrupting operations. This capability has become increasingly valuable as enterprises grow wary of relying on a single foundation-model provider.
The brokerage pointed to recent events involving Anthropic, whose disagreements with the U.S. government led to restrictions on some AI models and the withdrawal of one offering from the market. Organizations using an orchestration platform like Palantir would face only limited disruption, as the company can replace AI models underneath its software without requiring customers to redesign workflows.
This flexibility reduces concerns that enterprises might bypass Palantir in favor of directly adopting models from companies such as OpenAI or Anthropic. DA Davidson noted that businesses are increasingly aware that today's leading AI model may not remain the industry standard tomorrow and could eventually be displaced by lower-cost open-source alternatives.
Nvidia Partnership Strengthens Government AI Push
Investor sentiment also received a boost from Palantir's announcement of a strategic collaboration with Nvidia to develop custom AI models for the U.S. government. Under the partnership, Nvidia's AI infrastructure and Nemotron models will be integrated with Palantir's software platforms to create a secure "intelligent engine" capable of training, deploying, and managing AI models across government agencies.
The initiative further strengthens Palantir's presence in the public sector, where it already has deep relationships across defense and intelligence organizations. This move aligns with broader trends in government AI adoption, as seen in other recent developments like Rocket Lab's selection by NASA for two 2027 science missions.
Pullback Creates Buying Opportunity, Morningstar Says
Despite the recent gains, Palantir shares remain down about 25% year-to-date after surging 356% in 2024, a rally that pushed valuation multiples to elevated levels. Several analysts believe the correction has created a more attractive entry point.
Morningstar equity analyst Mark Giarelli noted that the broader rotation away from many AI early winners has left Palantir trading more than 40% below its 2025 peak. Morningstar assigns the company a fair value estimate of $153, implying the shares currently trade about 24% below intrinsic value.
"Palantir differentiates itself as the only AI company with a framework that organizes disparate datasets and facilitates optimized decision-making. It creates a comprehensive, closed-loop system in which data flows from individual sources and data users," Giarelli said, adding that Palantir drives efficiency gains from data, which accumulate and translate into switching costs for customers.
Morningstar's $153 fair value estimate implies a 2026 enterprise value/sales multiple of 48 times. The firm believes the AI revolution is still in its early innings, with Palantir's total addressable market potentially growing to $1.4 trillion by 2033. Morningstar forecasts five-year average annual revenue growth of 45% for the company and projects gross margins to remain in the 83%-85% range over the next decade.
Giarelli also cautioned that Palantir's long-term valuation depends on the size of the AI software market and the company's ability to sustain its competitive advantage. "Palantir's biggest uncertainty is the broad potential size of the total addressable market that its software can serve and the level of customer penetration it can achieve. If our bear case on market size comes to pass or a viable alternative emerges, the shares will likely prove worth far less than we expect," he said.
For context on broader market movements, see Dow Gains 204 Points as US-Iran Talks Advance and Accenture Stock Tumbles 25% in Worst Week Ever.
This article is for informational purposes only and does not constitute financial advice.
