Artificial intelligence outfit Palantir Technologies (NASDAQ:PLTR) may be poised to see its stock soar this Friday. Although it has already quadrupled in value in 2024 and has gained over 620% since its 2020 IPO, shares of the data analytics firm could see PLTR stock add more altitude to its gains.
That’s because Palantir could be added to the Nasdaq 100 index later this month. With a market capitalization of over $155 billion, the AI shop could end up ranking as high as the 25th largest stock on the index.
The Nasdaq 100 uses a modified market cap weighting system. Honeywell (NYSE:HON), the current 25th largest stock with a $151 billion market cap, accounts for 0.90% of the index. Figure Palantir will fit in there somewhere in terms of weighting when the Nasdaq exchange performs its annual reconstitution of the index.
The committee that determines the index composition met at the end of November and will announce its decision Dec. 13. The actual inclusion date is the first trading day after the third Friday of the month, or Dec. 23. That will induce the exchange-traded funds (ETFs) that track the index to pour the $550 billion worth of buying power the funds hold into PLTR.
Because Palantir Technologies is pretty much a lock on getting included, expect retail investors to rush in on Friday to buy up PLTR shares when the announcement is made.
24/7 Wall St. Insights:
- Palantir Technologies (PLTR) is a premiere AI stock with its feet firmly planted in the public and private sectors.
- As PLTR stock has quadrupled in value this year, it likely qualifies for inclusion in the Nasdaq 100 index, the changes for which will be announced on Dec. 13.
- If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.
A cornerstone of AI growth
Palantir has been on a tear due to AI-driven mania. Because the industry is still in its infancy, there is plenty of room for future growth on top of the tremendous gains already made. Yet it is not likely to be a straight line higher.
Although CNBC host Jim Cramer thinks Palantir is just a meme stock that only goes higher “because individual investors keep piling into it,” plenty of investors and Wall Street analysts would disagree.
Certainly it has meme stock characteristics because of its popularity on internet stock chat rooms, but Palantir also possesses fundamental weight behind its business. It has far outgrown its beginnings as a CIA-backed number crunching outfit for the government and other three-letter spy shops. Today, the data analytics firm uses its AI platform to provide enterprise-class companies the tools to analyze and understand the trillions of data points they create on their customers, logistics, and inventory into actionable news.
Palantir has been described as the best pure-play AI stock.
An increasingly crowded field
Yet the field is beginning to get crowded. Palantir stock is actually down 15% from the all-time high hit just last week after AI startup Anduril Industries announced a partnership with ChatGPT owner OpenAI to develop and deploy advanced artificial intelligence solutions for national security missions. Yet Palantir also just announced its own partnership with Anduril to advance AI for defense use.
It is probably no coincidence both of the AI companies derived names from J.R.R. Tolkien’s The Lord of the Rings trilogy. The palantir were seeing stones in the story that allowed users to see and communicate over long distances. Anduril was the sword of Aragorn, king of Men in Gondor, whose name means “flame of the West.” Both were powerful tools in the fight against evil, so it is fitting that the primary purpose of the AI tools of both Palantir Technologies and Anduril Industries is for U.S. defense purposes.
But Palantir sees its bigger growth market being the commercial side of the equation. Still, it has only 321 enterprise customers contributing $179 million in revenue in the third quarter. And while its customer count grew 39% year-over-year, the rate of sales growth is slowing.
Key takeaway
Palantir stock is not cheap. All that growth in a short amount of time has pushed PLTR stock to a valuation of 59 times revenue while going for more than 12 times its projected earnings growth rate.
So, while PLTR stock may get a bounce from its eventual inclusion in the Nasdaq 100 index, more circumspect investors might want to stay on the sidelines and wait for a better price to buy in at.
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