Palantir Stock (PLTR) Skyrockets: Here’s the Fuel Behind the Rally

Palantir's stock surges as institutional investors pile into AI-driven data plays. The controversial data-mining firm—once a Wall Street darling turned pariah—gets a second look as earnings defy expectations.

Bulls see upside in government contracts. Bears whisper 'overvalued tech spectacle.' Either way, the algos are buying.

Funny how a few billion in defense contracts can make ethics debates disappear faster than a retail trader's stop-loss.

Palantir is coming to the U.K.

After a potential deal was reported yesterday, this morning the U.K. officially announced an agreement that will see Palantir invest up to $1.5 billion in the country and "​​create up to 350 new high-skilled jobs, cementing the U.K. as a state-of-the-art defence technology hub."

Palantir has agreed to make the U.K. its "European HQ for defence" and will help develop AI-powered capabilities for the U.K. military. While the announcement focuses on the investment Palantir will make within the U.K., the company wouldn't agree to the partnership without the assurance that it WOULD see a return through lucrative defense contracts.

Image source: Getty Images.

Beware the valuation

This will likely lead to serious revenue for Palantir in the years to come. However, the details of the agreement were light, and using the language of "up to $1.5 billion" leaves a lot of room for maneuvering. The real figures could end up being much more modest.

The fact remains that Palantir stock is wildly expensive. The company's price-to-earnings ratio currently sits north of 560. Its price-to-sales ratio is 123. These are astronomical.

I do not believe Palantir can justify its valuation, even with its continued success.