By Mackenzie Tatananni
Palantir stock surged Monday on news that the North Atlantic Treaty Organization would use the company's artificial intelligence-enabled software to modernize its war-fighting capabilities.
Shares of Palantir Technologies climbed 8.3% to $95.87. The S&P 500 and tech-heavy Nasdaq 100 rose 1.6% and 1.9%, respectively.
The NATO Communications and Information Agency said it had completed an acquisition of Palantir Maven Smart System NATO at the end of March. The Maven system, which is also used by the U.S. military, leverages AI to collect and analyze large amounts of data to prioritize targets in battle.
NATO said it plans to use Maven to accelerate the adoption of novel AI solutions, including models and simulations that are in development across its 32 member states.
William Blair analyst Louie DiPalma said the agreement has "broader geopolitical significance than just another win for Palantir" because of concerns that Europe wants to rely less on American defense contractors.
"This award has favorable read-throughs across the U.S. defense sector," he wrote.
For DiPalma, the deal suggests Europe will probably remain a big buyer of U.S. systems .
Palantir, the analyst said, secured several contracts related to its Maven system last year, including a $480 million, five-year deal with the U.S. Combatant Commands and a $100 million agreement with the Army, Navy, and Air Force.
DiPalma said he thinks the stock has even more room to grow because the Army is seriously considering Palantir's software to power its NextGeneration Command and Control platform. He expects a contract announcement within the next few months.
Palantir, however, has a very high beta correlation with the Nasdaq 100, DiPalma noted. A stock's beta represents its degree of volatility against the overall market.
The stock has a three-year beta of 1.72 and a five-year beta of 1.61 in relation to the Nasdaq 100; a value over 1 generally indicates high volatility.
The stock's beta, in combination with its high valuation and exposure to federal spending, makes it a less attractive bid for investors, Barron's has reported. Of 27 analysts polled by FactSet, eight rate Palantir at Buy or the equivalent, 15 at Hold, and four at Sell.
DiPalma maintains a Market Perform rating on the stock.
"If the Nasdaq 100 continues to trend lower in the near term, Palantir shares will likely also decline, potentially by a 3-times factor of the market due to its high beta," he wrote.
Wedbush analysts, led by Dan Ives, reiterated an Outperform rating and $120 price target after the NATO announcement.
The Wedbush team said uncertainty surrounding military spending has caused shares to waver over the past few months. The stock began slipping in February after the Trump administration directed the Pentagon to identify $50 billion in programs that could be eliminated.
However, the analysts said, those concerns have mostly dissipated, and Palantir's "unique software approach" will help the company capitalize on the growing demand for AI.
In their view, the crackdown on federal spending might be a blessing in disguise because the government will be forced to rely on Palantir systems to become more efficient.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 14, 2025 11:29 ET (15:29 GMT)
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