Palantir Technologies is soaring to new heights in 2025. The security software firm’s shares have skyrocketed 49.6% this year, making it the top-performing stock in the S&P 500. Palantir is leaving Nvidia, the previous leader, in the dust as Nvidia’s shares are down 0.7% year-to-date.
Dan Ives of Wedbush said, “There are some transformational tech stocks that come along every decade and change the landscape. Palantir is one of them in our view and proved it for all the tech world to see.”
Palantir’s impressive run is a standout in the market this year. The average S&P 500 stock is down, and less than two-thirds of the stocks in the index are higher at all.
Only 16 stocks are up 20% or more, with Palantir being the sole stock to gain over 40%. The company’s December-quarter results, reported on Feb. 3, fueled much of the enthusiasm for its stock.
Palantir earned 14 cents a share, exceeding estimates by more than 27%. Shares are surging, pushing the RS Rating to a perfect 99. Analysts expect the company’s earnings to grow 30% in 2025 and another 25% in 2026.
However, investors should exercise caution as Palantir stock is currently extended and needs to form a base to be actionable, according to MarketSurge. Palantir faces competition for the title of the best S&P 500 stock. Constellation Energy, a Baltimore-based utility, is the runner-up with shares up 38.6% this year.
palantir’s strong S&P 500 performance
Super Micro Computer is another contender, with shares up 29.6% despite falling in 2024 due to accounting concerns. While Palantir is currently untouchable, it still faces competition for the top spot in the S&P 500.
Palantir’s meteoric rise has defied Wall Street’s expectations, with nearly every analyst expecting its stock to decline. As of February 10, only one analyst has a price target above Palantir’s share price of $116.65. The company’s seemingly impenetrable moat, driven by its AI-inspired Gotham operating platform used primarily by federal governments, has been a significant contributor to its success.
These multi-year contracts provide highly predictable operating and recurring profitability. However, history suggests that AI, like previous game-changing technologies, may need more time to mature than investors are currently accounting for. If an AI bubble were to burst, Palantir might be somewhat insulated due to its government contracts, but such events are often driven by emotion and could negatively impact its stock.
Another concern is Palantir’s extended valuation. As of February 10, its price-to-sales (P/S) ratio was a staggering 93, far above the historical range of 30 to 40 for companies on the leading edge of new technologies. Despite these concerns, Palantir continues to impress with its stellar fourth-quarter performance.
The company reported a 43% increase in customers, a 20% rise in average customer spend, a 36% growth in revenue, and a 75% increase in earnings per diluted share. Dan Ives of Wedbush Securities recently made a bold prediction, suggesting that Palantir could achieve a trillion-dollar market capitalization within the next two or three years, implying a 300% increase from its current market value of $250 billion. While Palantir’s high valuation necessitates prudence, its strong performance and future potential make it a compelling consideration for long-term investors.
However, potential investors might be wise to adopt a cautious approach, gradually building a position as the stock dips, provided the investment thesis remains unchanged.
