Shares of Palantir Technologies (PLTR 1.04%) rose 16.4% in September, according to data from S&P Global Market Intelligence. While it's impossible to know the exact reason for the move (especially given how volatile Palantir shares are on a day-to-day basis), there were likely two main drivers.
First, the move higher came as the market leaned back into artificial intelligence (AI) winners; Palantir may have benefited from this sentiment. Second, investors were likely still processing the company's remarkable August update.
Image source: Getty Images.
The AI backdrop
Palantir's second-quarter results, released in early August, were a wake-up call on growth, as the company's positioning as a mission-critical data platform in the age of AI began paying off in a much bigger way. Second-quarter revenue rose 48% year over year to about $1 billion, bolstered by 93% year-over-year growth in its U.S. commercial revenue and 53% growth in its U.S. government revenue.
The company also reported generally accepted accounting principles (GAAP) profitability, with a 27% operating margin, in the period. Those numbers, along with a huge boost to its full-year guidance, reframed expectations and likely continued to buoy sentiment into September.
Additionally, AI infrastructure bellwethers made significant headlines in September, reinforcing the view that spending on AI compute is still accelerating. Tech giant Oracle surged to record territory in mid-September after highlighting a powerful pipeline tied to AI workloads. CoreWeave, a fast-growing graphics processing unit (GPU) cloud provider, announced a $6.3 billion capacity agreement with Nvidia in mid-September and then an up-to-$14.2 billion agreement with Meta Platforms near month-end. Nvidia itself pressed to fresh all-time highs late in the month.
All this attention to AI likely helped Palantir shares during the month.
Has the sock rallied too high?
The question now is price. Palantir's market capitalization as of this writing sits at about $444 billion, versus trailing-12-month revenue of about $3.4 billion, implying a price-to-sales multiple above 130. A multiple like this assumes years of exceptional growth -- similar to the extraordinary levels we've seen lately.
That said, the company's second-quarter earnings update did more than just clear a high bar -- it raised it. Management's guidance hike, rapid U.S. commercial adoption, and improving profit margins suggest Palantir is hitting a tipping point in demand and scale.
Still, risks deserve attention. A slowdown in AI infrastructure spending, lengthening enterprise sales cycles, or a powerful competitor response could challenge today's valuation. In other words, the September jump looks grounded in stronger fundamentals and a supportive AI narrative -- but the stock also reflects that optimism.
