Palantir (NYSE:PLTR) just expanded its distribution deal with Carahsoft. Specifically, the expansion is for Palantir’s artificial intelligence (AI) database software as the company seeks government business outside of the military.
Shares of PLTR stock are up more than 160% in 2023 on AI hype. However, much of the company’s revenue still comes from the U.S. military. For instance, Palantir’s software is helping direct the war in Ukraine.
Palantir offers a proprietary database that can process sensor data to deliver quick, actionable insights on rapidly changing conditions like those on a battlefield. While war is profitable, it’s a limited market.
PLTR Stock: Here to Help Big Government
Investors are excited about the opportunities in AI, but there are few stocks to invest in. Palantir and C3.ai (NYSE:AI) — both of which have expanded from database software-as-a-service into large language models and machine intelligence — are primary beneficiaries of the AI trend.
Palantir co-founders Alex Karp and Peter Thiel have been sharp critics of big government, but still see it as a valid growth opportunity. Meanwhile, Carahsoft bills itself as “the trusted government IT solutions provider,” with customers on all levels of government.
Palantir’s market capitalization is now 18 times its sales, which are expected to grow only 19% next year. PLTR stock has benefitted most recently from investor interest in generative AI. However, justifying its valuation requires that Palantir expand into new markets.
Carahsoft can help with that. It will become a public sector distributor for Palantir, “making the company’s Apollo Platform available to the public sector via Carahsoft’s reseller partners, GSA Schedule” and to state and local governments. The two companies announced an initial collaboration agreement back in April 2022.
Palantir is also making inroads in markets like hospitals, where its software is used to manage patient flows through emergency rooms, predict the needs of staff and more. The company has also launched a service for manufacturers on Amazon’s (NASDAQ:AMZN) AWS cloud.
What Happens Next?
PLTR stock is rising on interest in AI. But its business is as a government contractor, primarily to the military. The company needs to grow dramatically to justify its current valuation.
On the date of publication, Dana Blankenhorn held a long position in AMZN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
