Palantir-Microsoft deal is ‘launching pad’ for AIP, Wedbush says

This week’s announcement that Palantir (NYSE:PLTR) has signed a deal with Microsoft (NASDAQ:MSFT) to provide artificial intelligence services for the defense and intelligence communities is potentially “game changing” and likely to be a “launching pad” for Palantir’s Artificial Intelligence Platform, Wedbush Securities said.

“With this marquee deal solidified and MSFT leveraging PLTR for AI and LLM capabilities to the US government, the company can now increase the pace of AI implementation while PLTR continues to accelerate AIP adoption within the federal sector,” analyst Dan Ives wrote in an investor note. “We believe this will be a launching pad for the PLTR AIP story to hit the DOD and broader Beltway ecosystem over the next 12 to 18 months.”

Ives maintained his Outperform rating and $38 price target on Palantir.

Under the agreement, the companies will integrate Microsoft’s large language models via Azure OpenAI service with Palantir’s AI Platform in Microsoft’s government and classified cloud environments.

The offering will include Microsoft’s Azure cloud compute and LLMs, such as OpenAI’s GPT-4, with Palantir’s Foundry data integration and ontology capabilities, and AI platform. It will help operators safely build AI-driven operational workloads across defense and intelligence verticals, according to the companies.

While Palantir has been able to grow its federal business (along with its enterprise business), the deal is likely to add to its “momentum mojo” in the federal space for the next several years, Ives added.

“With an enhanced product portfolio of advanced AI capabilities that will be safely, securely, and responsibly deployed for the US government, this was a major partnership deal to continue generating further momentum within the federal sector over the coming years with many government agencies seeking to integrate AI models to improve operational workloads,” Ives said.