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Palantir Technologies (NASDAQ:PLTR) stock shot over 4% higher on April 14 after the announcement that Palantir and NATO will partner to improve NATO’s defense capabilities and fighting prowess.
NATO will be using Palantir’s Maven Smart System. Terms of the deal were not immediately available, but the system is supposed to be operational within 30 days.
The Maven Smart System is currently being used by every branch of the U.S. military. With the NATO deal, Palantir solidifies its position as an AI leader as governments across North America and Europe look to direct AI spending.
This news comes after a quarter in which Palantir announced a contract with the U.S. Army through which it will support the Army’s Next-Generation Command and Control (NGC2) program. The contract could result in $100 million in annual recurring revenue (ARR) for Palantir.
The two announcements help to blunt analysts' concerns about government budget cuts undermining the company’s government revenue. But with valuation continuing to be a concern, how should investors view PLTR stock?
Dan Ives Is Bullish on the News
The news of the NATO contract was quickly picked up by Wedbush analyst Dan Ives, one of Palantir's most bullish analysts. At one point, he referred to the company as the “Lionel Messi of AI.”
In a research note to clients on Monday, Ives remarked that the deal “suggests that the firm (Palantir) continues to be viewed positively by Washington. In particular, PLTR’s prowess in AI continues to be appreciated by the U.S. government.”
Ives maintained his Overweight rating and $120 price target on PLTR stock.
Concerns About Losing Government Funding Are Fading
One headwind facing Palantir stock since the beginning of the year was the possibility that its revenue from the U.S. Department of Defense (DOD) might be cut as part of the Department of Governmental Efficiency (DOGE) review. It was a fair concern since over 50% of the company’s revenue comes from its U.S. government contracts.
However, recent news from Defense Secretary Pete Hegseth suggests that the fears are unfounded.
The DOD is planning to make $5.1 billion in DOGE-related expenses. Hegseth remarked that much of the cutting will come from “ancillary things like consulting and other non-essential services.” Palantir’s services for the government are neither ancillary nor non-essential.
That doesn’t change the reasonable obstacle that exists regarding Palantir stock’s valuation. But if the bears are looking for a reason to sell, a decline in government revenue is not a safe bet.
Positioned for the Next Wave of AI
Investors are rightfully concerned about the impact of tariffs on hardware related to AI infrastructure. However, the next wave of AI will be about software. And there’s an argument to be made that tariffs may bring in more revenue for Palantir.
We’re entering a time when companies will need to get very granular about understanding where their components are sourced from so they can assess the impact of future tariffs. Palantir is already doing this type of use case.
Plus, even though software is not expected to be impacted by tariffs, there is something to be said for doing business with a U.S.-based company like Palantir.
Analysts Are Raising the Floor for PLTR Stock
At two times since technology stocks began selling off in March, PLTR stock has found support at levels above its January 2025 low at around $69.
That suggests that, despite valuation concerns, investors are beginning to see a higher floor for Palantir stock, consistent with the opinion of many analysts.
The stock currently trades above its 100-day and 200-day simple moving average (SMA). And the recent move higher has it getting ready to push above the 50-day SMA which is generally considered a strong momentum signal.
Palantir CEO Alex Karp has made no secret of his disdain for short sellers. And the Palantir options chain for May 2, which is right before Palantir’s next earnings report, also suggests that short sellers are beginning to lose momentum.