Key Points
When most people think about artificial intelligence (AI), the first examples that come to mind are consumer-facing tools like ChatGPT or image generators. But there’s another side to AI that’s far less visible — yet potentially even more powerful for investors.
Enterprise AI software — platforms that help governments and corporations analyze data, make decisions, and optimize operations — could quietly become one of the defining technologies of the decade. And one company has established itself as an early leader in this field: Palantir Technologies (NASDAQ: PLTR).
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Image source: Getty Images.
What is enterprise AI software?
Enterprise AI tools differ from consumer AI in scope and application. While ChatGPT might draft an email or summarize an article, enterprise AI platforms embed intelligence directly into workflows.
Consider a hospital that uses AI to identify patient risks in real time, a financial institution that detects fraud before it occurs, or a defense agency that coordinates operations with AI-enhanced logistics. These systems aren’t add-ons — they are part of the core of how an organization operates.
That distinction matters for investors because enterprise AI tends to create sticky revenue. Once a company integrates Palantir’s software into its supply chain or decision-making, switching providers becomes a costly and time-consuming process. That leads to long-term contracts, recurring revenue, and durable customer relationships — all key ingredients for compounding growth.
Where Palantir fits in
Palantir has built its reputation on three core platforms: Gotham for defense and intelligence agencies, Foundry for commercial customers, and its newest offering, Artificial Intelligence Platform (AIP). Unlike generic data dashboards, these platforms enable users to integrate their data, run AI models, and gain actionable insights. The emphasis is on decision-making, not just analysis.
The government has historically been Palantir’s largest customer, with contracts from the Pentagon, intelligence agencies, and international allies. But the bigger story for investors is the commercial side of the business. Palantir is landing deals with financial firms, manufacturers, healthcare providers, and logistics companies that see its AI as a competitive edge.
This diversification is critical. For years, skeptics argued that Palantir was little more than a government contractor with limited upside. The surge in commercial demand is proving that the tech company can evolve as it sees the opportunity — according to Coherent Market Insights, the market size could reach $225 billion by 2032.
The bullish and bearish case for Palantir.
Palantir’s latest results illustrate why the bulls are excited.
In Q2 2025, Palantir grew total revenue 48% year over year to $1 billion, with U.S. commercial revenue up 93% and government revenue up 53%. Similarly, net income more than doubled from $136 million to $329 million. Management also raised full-year guidance to $4.14 billion–$4.15 billion. Those numbers show that demand isn’t just hype — it’s translating into rapid and profitable growth.
But then there’s the valuation. Palantir’s stock has surged around 370% in the last 12 months, giving it a market cap north of $400 billion. To put that into perspective, the stock trades at a price-to-earnings ratio of 571. Bulls argue that Palantir’s unique positioning in AI and defense justifies the premium. At the same time, skeptics point out that even great companies can deliver mediocre returns if bought at too high a price.
Momentum complicates things further. In the short run, Palantir could continue riding the AI wave much like Nvidia. But over the long run, returns will hinge on whether it can sustain growth and expand margins fast enough to support today’s expectations.
What it means for investors
Palantir is no longer just a secretive government contractor. It has emerged as a legitimate leader in enterprise AI, with traction across multiple industries. The growth opportunity is massive, and the company’s execution is proving that its products solve real-world problems.
For investors, the challenge is separating the business from the stock. Palantir is an excellent business, but the stock already reflects a significant amount of future growth. That doesn’t make it uninvestable — it just means the margin for error is thin.
For now, investors should keep Palantir on their radar. They should consider making their next move if the growth company continues to execute, if the stock valuation becomes more palatable, or both.
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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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