Palantir Technologies Inc. (NYSE:PLTR) and Anduril Industries, a defense technology company are spearheading a new consortium of technology companies to compete for U.S. Department of Defense contracts, challenging traditional defense contractors' dominance over the $850 billion defense budget.
What Happened: The group, expected to announce formal agreements in January, is in discussions with Elon Musk's SpaceX, OpenAI, Saronic, and Scale AI, reported the Financial Times on Sunday, citing people with knowledge of the matter.
This initiative comes as Palantir's market capitalization has surged to $169 billion, surpassing traditional defense contractor Lockheed Martin Corp. (NYSE:LMT). Palantir's stock has risen over 300% in the past year, though it recently faced headwinds after UBS initiated coverage with a neutral rating, citing valuation concerns.
The consortium aims to modernize defense procurement by offering smaller, autonomous weapons systems and AI-powered solutions. Recent collaborations already show promise, with Palantir's AI Platform being integrated with Anduril's Lattice autonomous software for national security applications.
Palantir and Anduril did not immediately respond to Benzinga's request for comment.
Why It Matters: The timing aligns with increased defense spending driven by conflicts in Ukraine and the Middle East, plus rising U.S.-China tensions. Palantir recently secured a $400.7 million contract extension with the U.S. Army, which could potentially reach $618.9 million over four years.
Traditional defense procurement has faced criticism for favoring established contractors like Raytheon Technologies Corp. (NYSE:RTX) and The Boeing Company (NYSE:BA), often resulting in costly, time-consuming projects. This new tech consortium aims to provide more efficient, cutting-edge solutions to meet modern military challenges.
Palantir stock closed at $80.55 on Friday, up 8.54% for the day, and rose 0.19% in after-hours trading. Year to date, the stock has surged 385%, according to data from Benzinga Pro.
The consensus price target is $35.58, with the highest target of $80, and the lowest of $7.50. Recent ratings from UBS, Mizuho, and Baird average $64.67, implying a 19.87% downside.
