Palantir Stock Gains. It Torpedoes Rivals to Win This New AI Contract.

Palantir shares are up 140% this year so far through to Tuesday’s close. (Photo by FABRICE COFFRINI/AFP via Getty Images)

Key Points

• Palantir Technologies secured a $448 million contract with the U.S. Navy to manage the supply chain for its nuclear submarine fleet.
• The Navy project, Ship OS, will initially focus on submarines, aiming to improve supply chain management and predict component needs.
• Palantir’s U.S. government revenue reached $486 million in the third quarter, marking a 52% increase from the prior year.

Shares of Palantir Technologies rose Wednesday after the company won a $448 million contract with the U.S. Navy to manage the supply chain of its nuclear submarine fleet.

Palantir shares closed up 3.3%. The software stock has more than doubled this year so far, but is down 1.3% over the past month through Tuesday’s close as some of the momentum has left of the artificial-intelligence trade.

That makes the submarine contract a timely reminder of Palantir’s increasing work with the U.S. military. Since President Donald Trump has returned to office, Palantir has landed new government contracts valued at around $2 billion, according to federal contracting data cited by The Wall Street Journal.

“In our view, this [Navy] contract has the potential to become one of Palantir’s largest programs, ” wrote William Blair analyst Louie DiPalma in a research note. “The U.S. Navy indicated that there is also the potential to expand the software beyond the submarine industrial base to other platforms.”

DiPalma has a Market Perform rating on Palantir stock.

Palantir’s project with the Navy, called Ship OS, is aimed at better managing the supply chain by replacing workers needed to manually track parts and predicting when components are needed. It will initially focus on submarines and could expand to other types of vessels, including aircraft carriers and jet fighters.

“By enabling industry to adopt AI and autonomy tools at scale, we’re helping the shipbuilding industry improve schedules, increase capacity, and reduce costs,” said Secretary of the Navy John Phelan in a statement on Tuesday.

There has been a lot of focus on Palantir’s federal contracts, including a decadelong deal worth up to $10 billion that consolidates 75 contracts it had with the U.S. Army. The company’s U.S. government revenue came to $486 million in its third quarter, up 52% from the same period a year ago.

However, the company would prefer investors focus on its commercial revenue, where there is more scope for growth and contracts are less lumpy. U.S. commercial revenue came to $397 million in the third quarter, more than doubling on the year.

Write to Adam Clark at adam.clark@barrons.com