On April 2, President Donald Trump announced "Liberation Day" -- marking the event with a host of new tariff policies aimed at virtually all major trading partners. Following the announcement, the capital markets experienced a period of intense selling with the S&P 500 and Nasdaq Composite both dropping by double-digit percentages.

Since the initial shock, however, stocks have started to rebound as positive dialogue with important trade partners including China has come to light. While it appears that some progress is being made, smart investors understand that negotiations and tariff policies can change overnight. For these reasons, investors should be looking for businesses that are insulated from tariffs right now.

Let's explore why data analytics company Palantir Technologies (PLTR 4.67%) fits the bill and could be your best bet given the heightened uncertainty driving the direction of the stock market right now.

What type of companies tend to hold up well in a tariff environment?

Tariffs are taxes placed on imported and exported goods. One important detail to understand about tariffs is that businesses that manufacture physical items tend to be most vulnerable. In addition, tariff policies can exclude certain items underneath a broader category.

In other words, a policy could exempt automobile parts or semiconductor chips, for example. The big idea here is that unless you're following these policies down to the last detail, it can be quite daunting trying to identify a company that could hold up well during a period of pronounced tariffs.

One industry that tends to hold up well regardless of tariffs is software. All things considered, software tends to be relatively immune to tariffs because it's a service-oriented business that doesn't rely on importing or exporting physical goods.

Image source: Getty Images.

Why Palantir is in a unique position

Software businesses can be indirectly impacted by tariffs in two major ways. First, it's possible that the equipment they rely on to develop their services (i.e., data centers, hardware) is subject to higher prices due to tariffs. In addition, businesses may choose to reduce their IT budgets during periods of higher prices.

Nevertheless, Palantir appears to be in a unique position right now. Shortly after President Trump's "Liberation Day" announcement, Palantir released a new module showcasing how its artificial intelligence (AI) software suite can help retailers analyze the impacts of tariffs on their business.

I found this to be a savvy marketing tactic by Palantir, as it is essentially illustrating how tariffs can actually be a tailwind for the company. In other words, Palantir's ability to help its customers make AI-informed decisions rooted in real-time data indexed against a fluid tariff environment is a major value-add proposition.

I know the scenario above sounds great in theory, but how has Palantir actually held up as of late? Well, during the company's first-quarter earnings call earlier this month, management raised its revenue and profit guidance for the full year -- suggesting strong growth prospects despite a challenging macroeconomic picture featuring higher tariff-induced prices.

To me, this underscores how critical Palantir's products are for its customers, as well as the company's resiliency during a period of uncertainty.

Is Palantir stock a buy right now?

Even though Palantir is in a rare position to be experiencing growth during the current environment, the stock needs a closer look before investors pour in. So far in 2025, shares of Palantir have risen by 67% as of this writing (May 20). To put this into perspective, the S&P 500 and Nasdaq Composite are both at break-even levels for the year.

To better understand Palantir's valuation, just look at the chart below. At a price-to-sales (P/S) ratio of 101, Palantir is the priciest software stock in a cohort featuring both large-cap technology leaders such as Salesforce and SAP, as well as high-growth AI companies including CrowdStrike, Snowflake, and Cloudflare.

PLTR PS Ratio data by YCharts

Each of these companies develops important pieces of software and theoretically stands to thrive in the tariff environment. So why is Palantir stock experiencing such outsized momentum?

To me, I think it all boils down to hype. Palantir has an eccentric, charismatic CEO that is adored by the retail investing community. To boot, it's not uncommon for investors to follow momentum -- especially during a period when finding winners is tougher than usual.

While I think Palantir's current valuation is hard to justify, I do see the stock as a long-term buy. When it comes to AI-powered software businesses, Palantir is my top pick right now. I think the most prudent strategy for investors is to buy shares of Palantir at different price points over the course of many years, with the intention of holding on to the stock for the long run.