Will Palantir Technologies Be a Trillion Dollar Stock by 2030?

The $1 trillion club is elite. As of this writing, only six US companies boast a market capitalization of more than $1 trillion: Apple, Microsoft, Nvidia, Alphabet, Amazonand Meta platform.

However, looking at the next few years, other companies are likely to join the club.

So what do you say? Palantir TECHNOLOGY (PLTR -2.80%)a company at the forefront of the artificial intelligence (AI) revolution? Could it follow its recent stock market rally to a $1 trillion valuation?

Let’s dive in and see.

What does Palantir do?

First, in order to understand why Palantir could reach a $1 trillion valuationyou have to understand what does the company do

In the simplest terms, Palantir is a company that solves problems. Every day, the world produces an incalculable amount of data. This data can be a powerful asset, especially for the organizations that produce it, but its sheer volume often makes it difficult to analyze and understand.

Take a hospital, for example. On any given day, a hospital can admit hundreds of patients, collect millions of data points, and schedule thousands of hours of work for doctors, nurses, and other staff.

palantir, through its AI-based platform, it seeks to provide clarity to customers in large organizations such as hospitals. By using company platform, staff members can identify patterns and develop solutions that deliver better outcomes for all stakeholders.

For example, the National Health Service (NHS) in Great Britain has used Palantir technology to help improve its efficiency and therefore reduced patient waiting times for surgery.

Providing these improvements can save large organizations a lot of money. Because of this, Palantir is seeing its customer base explode. In its most recent quarter (the three months ended June 30, 2024), the company’s customer base grew of 41% compared to a year ago. While Palantir previously focused on government contracts, its push into the private sector is taking off with US commercial customers grew 83% year-over-year.

In short, over the next five years (and beyond), organizations will continue to deploy AI-based solutions to help improve their operations and save money. Palantir stands to gain, and that’s why its stock is up 129% year-to-date and could rise much more over the next five years.

Can Palantir Become a $1 Trillion Company?

Next, let’s examine how big Palantir already is. As of this writing, the company has a market cap of $89 billion. So, for Palantir to reach a market cap of $1 trillion, its valuation would have to increase by about 11 times. In other words, his stock should increase in value by 1,100%. This results in a compound annual growth rate (CAGR) of over 62%.

To say the least, this is a tough job. However, it is not impossible. In fact, there are examples of companies meeting or exceeding that level of growth.

For example, in the last five years, Nvidia and adze both posted CAGRs exceeding 62%. Nvidia has an incredible CAGR of 93%, while Tesla is at 74% — all of that growth coming in the years between 2019 and 2022.

And there are others who have come close. Eli LilyThe five-year CAGR is 52%; Broadcomis 45%.

NVDA data by YCharts

In other words, a CAGR of 63% is amazingly high, but not unachievable.

That said, Palantir would need an amazing rally to have any chance of reaching a $1 trillion valuation by 2030 — which I think is unlikely to happen.

Is Palantir now a buy?

However, perhaps the better question to ask is whether Palantir stock is a buy right now.

On this question, I am much more optimistic.

Palantir is a well-run company with an innovative product riding the wave of AI excitement. Its revenue growth is 27%, while the number of customers is growing even faster.

In short, the company remains a growth investor’s dream come true. And so I continue to think it’s a stock worth owning — even if it’s unlikely to reach a $1 trillion valuation by 2030.