Palantir Technologies PLTR shares extended their recent rally on Thursday after DA Davidson upgraded the software company to Buy, arguing that its role as an artificial intelligence orchestration platform is becoming increasingly valuable as enterprises seek flexibility in deploying AI models.
The stock rose more than 4% in premarket trading, building on an 8% gain from the previous session after Palantir unveiled a new AI partnership with Nvidia aimed at supplying advanced artificial intelligence capabilities to US government agencies.
The brokerage raised its price target on Palantir to $175 from $165, an almost 40% upside to its current levels, while upgrading the shares from Neutral to Buy, saying the company has largely grown into its previously stretched valuation as earnings and profitability have accelerated.
Palantir generated revenue growth of 68% over the past 12 months, reaching $5.2 billion, while maintaining an industry-leading gross profit margin of 84%.
AI orchestration seen as a competitive advantage
According to Investing.com, DA Davidson said Palantir’s biggest advantage lies in its ability to serve as an orchestration layer that sits above multiple AI models, allowing customers to switch between underlying technologies without disrupting their operations.
The brokerage said that capability has become more valuable as enterprises grow increasingly reluctant to rely on a single foundation-model provider.
The firm pointed to recent developments involving Anthropic, whose disagreements with the US government resulted in restrictions on some of its AI models and the withdrawal of one of its offerings from the market.
According to DA Davidson, organizations using an orchestration platform such as Palantir would face only limited disruption because the company can replace AI models underneath its software without requiring customers to redesign their workflows.
That flexibility, the analyst said, reduces concerns that enterprises could bypass Palantir in favor of directly adopting models from companies such as OpenAI or Anthropic.
The brokerage added that businesses are becoming more 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 after Palantir announced a strategic collaboration with Nvidia to develop custom AI models for the US government.
Under the partnership, Nvidia’s AI infrastructure and Nemotron models will be integrated with Palantir’s software platforms to create what the companies described as 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, an area where it already has deep relationships across defense and intelligence organizations.
Pullback creates buying opportunity, Morningstar says
Despite the recent gains, Palantir shares remain down about 25% this year 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 of artificial intelligence’s 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.
“Our $153 fair value estimate implies a 2026 enterprise value/sales multiple of 48 times. We believe that we are in the early innings of an AI revolution; our base case has Palantir’s total addressable market growing to $1.4 trillion by 2033. We expect Palantir to drive efficiency among enterprises that now rely on large IT teams to interpret and present data to support decision-making. We forecast five-year average annual revenue growth of 45% for the company. We project gross margin to remain in the 83%-85% range over the next 10 years as we balance onboarding higher-margin enterprise customers with the potential for cloud costs to rise amid ever-increasing demand for computing resources,” he added.
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. There is a chance that a technological juggernaut will develop software rivaling Palantir’s AI solutions,” he said.
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