The artificial intelligence gold rush has caused blistering returns for many tech stocks, including Palantir Technologies.
While the S&P 500’s 24% return last year is impressive, Palantir’s 340% return trounces it. Even more eye-popping, Palantir’s stock price has skyrocketed 616% since February 2022.Â
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Those remarkable gains likely surprised many investors concerned that the Peter Thiel-founded and Alex-Karp-run company would struggle because of recession risk in 2022 and 2023 and congressional wrangling over the debt ceiling’s potential budget risk to the Defense Department, a key Palantir client.
However, veteran Wall Street analyst and trader Stephen Guilfoyle was unfazed.Â
He originally bought Palantir stock near $6 per share, and he’s been among the company’s biggest bulls ever since. He even picked it as his favorite stock to own in December 2023 and as his Single Best Stock in May 2024.
Where others saw risk, he saw an opportunity.Â
Related: Fund manager who predicted Nvidia rally revamps stock forecast
Is Guilfoyle still a fan following Palantir’s recent stock slide? The company’s shares are down over 30% from mid-February highs following an unexpected decision by its CEO and amid ongoing budget negotiations in Washington, D.C.
The decline isn’t lost on Guilfoyle, who updated his analysis and stock price target this week.
Palantir’s demand driven by AI surge
Guilfoyle originally bought Palantir stock because of its strong, debt-free balance sheet, improved free cash flow, and improved path to profit growth.
A lot has changed since then.Â
Palantir’s future is arguably much brighter following surging interest in artificial intelligence applications across most industries.Â
Related: Alex Karp’s net worth: The Palantir CEO’s wealth in the AI age
The ability of AI to digest, interpret, and create new insights from previously siloed data has caused the most rapid increase in research and development spending since the Internet Age in the 1990s.
Banks already use AI programs to hedge risks, evaluate loans and price financial products. Drugmakers are exploring its use in predicting drug targets and clinical trial outcomes. Manufacturers are considering if it can boost production and quality. AI may also help retailers forecast demand, manage inventories, and curb theft. Importantly for Palantir, given the U.S. is one of its biggest customers, the U.S. and its allies are knee-deep researching AI for military use.
Seemingly, AI’s widespread application is without bounds. That’s undeniably been positive for Palantir.
The company’s roots are in helping the U.S. government create counterterrorism systems. Today, its Gotham platform helps allies and enterprises manage, interpret, and report data across enterprise and cloud networks.
This puts it in a perfect position to help customers design large language models and other AI solutions, like agentic AI, using its AI platform (AIP).
“The demand for [Artificial Intelligence Platform] AIP is unlike anything we have seen in the past twenty years,” said CEO Alan Karp in 2023.
He wasn’t kidding.Â
The company’s year-over-year revenue growth has accelerated in each of the past four quarters to 36% in Q4. In 2024, Palantir’s revenue totaled $1.90 billion, and that’s turned its business profitable.
In the fourth quarter, it reported earnings of 14 cents per share, up 75% from the same quarter the previous year.
Palantir news causes a sell-off
Palantir’s run-up was derailed this month by increasing concerns that Elon Musk’s Department of Government Efficiency (DOGE) would target the Defense Department budget, causing slowing demand for key Defense companies.
Related: Veteran fund manager sounds alarm on Palantir’s stock
The worry may not be misplaced.Â
In mid-February, word spread that U.S. Defense Secretary Pete Hegseth asked the Army, Navy, Air Force, Marines, Space Force, and civilian agencies to target 8% spending cuts for fiscal 2026 and future years.
That wasn’t the only news that derailed Palantir’s climb, though.
The shares also dropped after CEO Alex Karp announced plans to sell about 10 million shares in Palantir stock worth about $1 billion, according to Barrons.
The news spooked investors despite the fact that Karp has sold shares previously and will still own about 90 million shares in the company.
In an SEC Filing on February 20th, Karp disclosed he sold 585,000 shares worth about $60 million. He also sold shares worth over $100 million in November and sold an estimated $2 billion in stock in 2024.Â
Analyst rethinks his Palantir stock price target after drop
Guilfoyle previously called Palantir a long-term stock pick, saying last year, “I’m buying for future generations.”
He’s still a long-term fan of the company, but recent events have forced him to dispassionately rethink his near-term stock price target.
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“Yup, I’m the guy who made the Palantir Technologies call when it was trading with a $6 handle,” wrote Guilfoyle in a post on TheStreet Pro. “While the next industrial revolution driven by generative AI is probably alive and well, as the nation and financial markets prepare for an economic rough patch and some fiscal austerity, the AI-created asset bubble appears to have run its course.”
Previously, Guilfoyle’s Palantir stock price target was $133. What’s he thinking now?
“Palantir may hit $133 at some point, but obviously, even if the stock started to put something constrictive together right now, this is no longer a valid target,” wrote Guilfyole. “The $125.41 high of February 19, which was an awful day for the stock, will be the stock’s all-time high for at least a while.”
What that means for investors will depend on many factors, including time horizon and investment goals. As for Guilfoyle, he’s actively trading around a core position in the stock.
“Hope is not a strategy,” reminded Guilfoyle. “Algorithms react when a CEO decides the time has come to take (more) profits on a chunk of shares or when a major client of said firm, the U.S. Department of Defense, looks to cut costs.”
He says his most recent buying happened below $80 per share last week. However, he’s not ignoring the fact that this might not be the bottom.
“Where is support? Well, the 200-day SMA lives at $49 and nothing is impossible,” said Guilfoyle.
Related: Veteran fund manager unveils eye-popping S&P 500 forecast
