Palantir Surged Today -- Is the Artificial Intelligence (AI) Stock a Buy?

Palantir (NASDAQ: PLTR) stock posted big gains in Monday's trading. The software company's share price closed out the daily session up 4.6% and had been up as much as 9.9% earlier in the session. Meanwhile, the S&P 500 and the Nasdaq Composite closed out the day up 0.7% and 0.6%, respectively.

The broader market moved higher today following news that mobile devices, computers, and other electronics will at least be temporarily exempt from the Trump administration's reciprocal tariffs -- and Palantir benefited from the momentum. The stock also got a boost from news that NATO had signed on to use the company's Maven Smart System artificial intelligence (AI) platform for military applications.

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Is Palantir stock a buy right now?

Despite huge volatility for the stock market in 2025, Palantir stock is actually up big across the stretch. The company's share price has risen roughly 22.5% year to date, and the gains have pushed the software specialist's valuation multiples up to even more growth-dependent levels. Palantir is now trading at approximately 166 times this year's expected earnings and 57 times expected sales.

With shares trading at valuation multiples that are very high even compared to other high-growth software stocks, investors without a high tolerance for risk and volatility should probably steer clear of the stock. Many indicators suggest that Palantir is a great company -- but its valuation profile will be disqualifying for many investors.

On the other hand, I actually think that investors who buy Palantir stock today and hold it over the next five years will see returns that significantly outperform the broader market. Some fantastic growth is already priced into the company's valuation, but the business has been recording great margins and has a huge runway for long-term expansion -- and the recent NATO contract win is a strong bullish indicator.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.