The Federal Aviation Administration has rolled out its artificial-intelligence tool for air traffic control at three major Washington-area airports. How well it will work remains to be seen. But at least one party couldn't be more thrilled: Palantir Technologies.

The FAA on Monday began using its so-called SMART AI program for air traffic control and Rosenblatt analyst John McPeake believes there is a FAA "opportunity" for Palantir.

"We think what started in 2021 as a Palantir aircraft safety monitoring solution in the wake of 737 MAX safety issues is being expanded internally as the agency expands Palantir use cases to additional safety use cases after the Washington D.C. in-air crash in January of last year and the LaGuardia runway collision in March," McPeake said in a research note.

McPeake has a Buy rating on Palantir with a $225 price target.

The analyst added that a likely contract expansion between Palantir and the FAA could mean Alex Karp's company could expand its government revenues in a significant way.

This belief comes even as U.S. aerospace and defense AI company ASI was awarded a 12-year contract for software and AI by the FAA. that contract is worth $875 million.

McPeake wrote that while it appears that ASI "beat out" Palantir for the FAA's AI air traffic control system, there are likely to be multiple vendors and awards for the system.

The analyst believes that Palantir is working with the FAA on safety and predictive patterns.

Although it's difficult to size up Palantir's FAA business precisely, Rosenblatt estimated that the 2021 contract was worth $18 million. The firm added that the FAA's AI system will likely drive "significantly more meaningful revenue" to Palantir.

Palantir stock declined 0.2% to $184.92 in premarket trading on Wednesday after ending Tuesday up 1%.

The stock has had a turbulent year and investors haven't been able to shake off the jitters about AI disruption. Shares have risen 4% this year as of the closing bell on Tuesday. The stock, however, surged more than 51% in August to become one of the best-performers in the S&P 500 for the month.

Palantir's blowout second-quarter earnings on Aug. 3, which showcased a spike in customer demand that included U.S. sales more than doubling, triggered the run.

While the stock performance has been lackluster this year, Palantir's business growth has accelerated and that doesn't look to be changing any time soon.