Near $200, might Palantir stock become the next Microsoft?

Palantir Technologies (NASDAQ: PLTR) stock has produced truly eye-popping gains since ChatGPT was unleashed in late 2022. We’re talking about a near-2,500% return!

That actually outdoes Nvidia, the kingpin of the whole AI revolution, whose shares are up by 1,000%. I don’t know how Nvidia shareholders could even put food on the table after such a measly return.

A milestone quarter

Palantir was the fourth most popular share on AJ Bell‘s platform over the past week, just ahead of Nvidia. The leading three were all juicy dividend payers, showing that this stock remains incredibly popular with UK retail investors.

Naturally, some of this buying will have been driven by speculation and FOMO (fear of missing out). But the numbers Palantir is putting up are undoubtedly very impressive. Revenue topped $1bn for the first time in Q2, well ahead of the $940m anticipated by Wall Street.

Incredibly, US revenue jumped 68% year on year, with US commercial revenue nearly doubling. And the software firm closed 157 deals of at least $1m, and over 100 deals worth a minimum of $5m.

On the bottom line, adjusted earnings per share of $0.16 beat estimates for $0.14.

Looking ahead, Palantir also boosted its full-year outlook. Management now expects around $4.1bn in revenue rather than $3.9bn.

Driving much of this incredible business performance is Palantir’s Artificial Intelligence Platform (AIP). This pulls together data from many sources then structures and readies it for AI models to deliver actionable insights.

Bullish

On every metric, the company is firing on all cylinders. So it’s easy to see why the stock is absolutely surging, helped by CEO Alex Karp’s uber-bullish commentary.

The sceptics are admittedly fewer now, having been defanged and bent into a kind of submission. Yet we see no reason to pause, to relent, here…We believe that Palantir will become the dominant software company of the future.

Alex Karp

The last time there was a technology anywhere near as consequential as AI was the internet during the 1990s. Back then, investors piled into tech stocks and sent them to the moon. Very few ever recovered when the dot-com bubble burst.

As we know though, Microsoft was one that did. It went onto become the dominant software company of our age (sound familiar?).

But it’s worth remembering that it took 16 years and 8 months before Microsoft’s share price recovered from the dot-com peak in 1999.

In other words, it spent a decade and a half in the wilderness, despite strong business growth.

Echoes of the past?

Might we see something similar with Palantir? I ask this because its market cap of $445bn puts the stock at 108 times forecast sales.

This seems ridiculous, even if the company goes on to beat current growth forecasts.

Of course, I’m not saying Palantir won’t become the next Microsoft over the next two decades. And yes, I’m kicking myself for not investing a couple of years ago.

However, two things can be true simultaneously. One, the company is world-class and is going to dominate the AI software space for the next decade — and the share is grossly overvalued.

As Palantir stock heads higher, I think it risks becoming the next Microsoft. This is why I’m keeping it just on my watchlist for now.