This past weekend, Palestinian military organization Hamas staged a surprise and violent attack against Israel. 

Sure, the stock market shrugged off the geopolitical crisis. In fact, stocks actually rallied yesterday because investors perceived the war as localized and largely contained – much unlike the Yom Kippur War 50 years prior. 

Nonetheless, the violent attack escalates already strained global geopolitical tensions. 

Russia is fighting Ukraine. Folks have been murmuring about a potential Chinese invasion of Taiwan for a year now. The U.S. and Saudi Arabia are engaged in an oil supply war; the former is releasing supply and the latter is cutting it. 

And now the Middle East is at risk of experiencing its biggest war in decades. 

Not good.  

Of course, when geopolitical tensions are this high, countries increase their spending on defense, military, and intelligence. 

That’s why we think Palantir (PLTR) stock is a fantastic AI stock to buy amid this global geopolitical chaos.

The AI Stock Primed to Profit From Increased Defense Spending

Palantir is an American software company that creates advanced data science tools for all types of organizations. But its main focus is on U.S. and allied government agencies. 

These tools are the most advanced data science tools in the world. They are critical to American defense, security, and intelligence. 

The CIA and FBI use Palantir’s software for intelligence analysis and data integration to support its missions. 

The Department of Homeland Security uses it for border security, immigration enforcement, and more. 

And the Department of Defense uses Palantir’s platform for intelligence analysis and operational support. 

Across all departments, the U.S. government relies heavily on Palantir technology to keep Americans safe. 

And as a direct result of recent violent geopolitical developments, the need to keep Americans safe will rise significantly in the coming months. 

Consequently, demand for Palantir’s solutions will, too. 

Why else do you think Palantir stock popped 6% yesterday?

This company sells the stuff that helps the U.S. and its allies stay prepared in a tense geopolitical environment. That means this is an AI stock you buy when geopolitical tensions are on the rise.

And geopolitical tensions are higher today. 

So… go ahead and buy Palantir stock. 

And don’t sell it anytime soon. 

We view this company as the “Microsoft of AI.” In fact, we believe that within five to 10 years, Palantir’s Artificial Intelligence Platform for data science will become as ubiquitous as Microsoft Office is today. 

If that happens, PLTR stock will soar by many multiples. 

The Final Word

Based on total government and commercial sector spending on data analysis tools, Palantir pegs its total addressable market at $120 billion. Analysts expect that to grow to $230 billion by 2025. And we see it pushing toward $300 billion by 2030. 

Let’s assume Palantir nabs a conservative 5% of that market. That implies Palantir’s 2030 revenues will hit $15 billion.

We think that at scale, the firm can operate at 40% EBITDA margins. On $15 billion in revenues, that puts Palantir’s 2030 EBITDA potential at $6 billion.

Taking out depreciation, amortization, interest, and taxes, we think that will flow into about $4 billion in net profits. 

A market-average 20X earnings multiple on that implies a long-term valuation target of $80 billion for PLTR. 

The firm is worth $35 billion today. 

Palantir is a fantastic long-term stock to buy to play the rapid emergence of AI. But this technological boom will create multiple huge stock market winners – not just one. 

Find out the best stocks to add to your portfolio now before they rocket.

On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.