Investing

This AI Stock Has Surged 656%, and Could Surge Another 23% in 2025, According to Analysts

Chris MacDonald

Published: January 22, 2025 10:30 am

As far as key catalysts for growth investors are concerned, artificial intelligence remains the top factor on top of mind for most investors right now. In combination with a range of new AI offerings, big data company Palantir Technologies (NASDAQ:PLTR) has seen its stock price skyrocket more than 650% since its IPO, and could surge another 23% in 2025 (if Wall Street analysts are correct).

Given the fact that the overall data services market is expected to grow more than 82% over the next three years, according to Edge Delta, there are fundamental drivers behind such calls, and reasons why investors continue to pile into this very richly-valued growth stock.

Trading at roughly 150-times earnings and 65-times sales, Palantir could be among the most expensive stocks in the market. With that said, let’s dive into the bull case behind this company surging to a new all-time high in 2025 and leading the market higher once again.

Key Points About This Article:

• Palantir is certainly among the most richly-valued growth stocks in the market, but is one long-term investors continue to pile into given its catalysts.
• Here’s the bulls case behind why some analysts think more than 20% upside this year could be in the cards for this AI beneficiary.
• 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.

Leveraging AI Strengths

Palantir’s status as a leading big data company is well-known, with Palantir getting its start decades ago as a provider of analytics and big data services for various government-related agencies and institutions.

However, in recent years, the Peter Thiel-led company has expanded into the commercial market, integrating AI models into its existing platform to provide more versatile value to its clientele. The company has continued to focus intently on its application and workflow layers, with Palantir’s AI-enabled platform providing a wider range of capabilities in enabling data-driven decisions across industries. 

Investors have continued to hone in on the significant commercial growth Palantir is seeing thanks to its AI integrations. With U.S. commercial revenue rising 54% year-over-year this past quarter, and the company’s overall customer count up 77% over the same time frame, that’s some serious growth for a company of this size. Notably, overall revenue also increased 30%, signaling the importance of the company’s commercial operations (as a smaller, but faster-growing segment the market had previously ignored).

I the company can continue to outpace competitors in this space, its future growth rate could allow the company to grow into its lofty multiple, but this will require margins to remain robust and revenue growth to continue for at least a few years.

The Numbers Don’t Lie

Impressively, Palantir has become an AI software company that’s now ranked among the top five AI software platform providers as of 2024. In other words, Palantir is now competing with giants like Microsoft and Google – something many of the most ardent bulls may not have expected five years ago. 

This is mostly due to fundamentals, with Palantir’s growth metrics shining bright over the past year. The company’s 2024 revenue grew 27% year-over-year, reaching $2 billion in the first nine months. Driven by rising demand for AI integration in business operations, investors largely expect this growth to continue (or accelerate) through 2025.

Known for its data analytics software Foundry and Gotham enhanced with AI platform AIP, Palantir reported very impressive 30% revenue growth in Q3. We’ll have to see if this growth can continue, but most experts have recognized AIP as a leader, outperforming competitors like Google. Notably, U.S. government sales also surged 40%, driven by strong AIP demand. These two segments combined drove earnings per share to rise 43% to $0.10 this past quarter (and expectations are for significant bottom line growth moving forward).

Stock Price Predictions Vary

Palantir’s 2024 revenue growth outpaced 2023, driven by an aggressive strategy promoting its AI Platform (AIP). Conducting nearly five daily boot camps, the company educated clients on integrating AI, boosting its Q3 customer base by 39% year-over-year to 629. Notably, commercial customer growth reached 51%, and many new clients signed larger follow-up deals.

Palantir offers significant growth potential, but its high valuation leaves little margin for error. For 2025, Salesforce appears a safer, more affordable choice, especially with opportunities like Agentforce.

Analysts have varying projections for Palantir Technologies’ stock performance in 2025. The expected surge in percentage terms is around 23.59%, which would bring the stock price to approximately $88.12 by January 2025. Additionally, UBS has estimated that Palantir will experience a revenue growth of 28% in 2025, which could positively influence the stock’s performance, although specific price targets vary among analysts.

Is Palantir a Buy in 2025?

Palantir operates in a rapidly growing AI software market, projected to expand from $28 billion in 2023 to $153 billion by 2028, with a 40.6% CAGR. This growth potential has boosted its forecasts, but its high valuation poses a challenge. However, a forward price-earnings of 154 reflects expectations for significant profit gains, supported by a 52% earnings increase in 2024.

Analysts predict slower earnings growth for Palantir in 2025 and 2026, but the expanding AI software market and its growing customer base suggest potential for better performance. Growth-focused investors might still find upside in holding Palantir shares, though this is a company that may certainly struggle if valuation headwinds pick up in the market and growth doesn’t materialize as expected in 2025.