Why Palantir Gained Over 15% This Week

Actions of Palantir (PLTR 0.17%) rose 15.1 percent this week through Thursday trading, according to data from S&P Global Market Intelligence.

Palantir rose Monday on news that the stock would be added to the prestigious S&P 500 index. In addition, the company announced a five-year extension with the oil and gas giant BP plcand hosted its fifth AIPCon, showcasing the company’s AI platform.

A great achievement

The S&P 500 only admits certain companies that meet several criteria, including positive earnings over the last four quarters, a market capitalization of more than $8.2 billion and decently liquid stock.

It’s a prestigious honor for Palantir and now means investors in S&P 500 index funds will be required to buy its shares. That’s potentially good news for shareholders because the three S&P 500 index funds at State Street, Vanguard and Blackrock are the largest exchange-traded funds in the world. Most of Palantir’s gains came on Monday after the news was announced on Friday.

Palantir also announced a five-year extension to its current engagement with BP this week. BP had already been a customer since 2014, using Palantir’s “digital twin” simulation for its oil and gas operations. Now with Palantir’s year-old AIP platform, BP will incorporate large language models (LLM) into its workflows for better decision making.

Speaking of AIP, which is Palantir’s AI-powered software that leverages LLMs for tangible business results, Palantir held its fifth AIPCon on Thursday. AIPCon was attended by more than 100 AIP commercial customers, with several presentations on how these organizations benefit from AIP.

Palantir is firing on all cylinders, but it comes at a price

The S&P 500 inclusion is a testament to Palantir’s recent success. Is the stock now a buy, though?

Palantir now trades at more than 33 times sales and 82 times next year’s estimated earnings. So while the company is seeing some AI-driven acceleration, there isn’t much margin of safety in buying the stock at these levels.