Palantir rallies 15% for the week as Iran war boosts prospects, muting Anthropic concern

In a surprising twist during a challenging week for the stock market, Palantir Technologies witnessed its shares surge by 15%. This uptick followed a military engagement involving the U.S. and Iran, positioning Palantir favorably as a provider of software solutions to the U.S. government. While the tech-heavy Nasdaq faced a downturn of 1.2%, influenced by declines in major players like Apple, Google, and Micron, Palantir's stock thrived. The broader market struggled as rising oil prices coincided with an unexpected job loss report from the U.S. economy. With President Trump showing no immediate signs of de-escalation in the conflict, investors turned their attention to Palantir, which derives approximately 60% of its revenue from government contracts and has been intensifying its collaborations with military and intelligence agencies. Meanwhile, Wall Street's concerns regarding the recent blacklisting of AI firm Anthropic, which began collaborating with Palantir on defense projects in late 2024, appear muted. Analysts at Rosenblatt retained their buy recommendation for Palantir, raising their price target from $150 to $200. They noted that ongoing geopolitical tensions in the Middle East are likely to enhance Palantir's government business pipeline, while suggesting that alternatives to Anthropic's AI models are readily available. Palantir has previously secured significant contracts, including a staggering $10 billion deal with the Army. The company provides advanced AI capabilities, such as weapons targeting, via its Maven Smart System. Notably, its tools have been utilized in operations in Iran. In terms of its partnership with Anthropic, Palantir has remained tight-lipped about future plans following the Defense Department's announcement that Anthropic's technology would be barred from government contracts. This decision came after the two entities could not agree on the application of AI models regarding autonomous weapons and domestic surveillance. Anthropic's CEO, Dario Amodei, has publicly stated his intent to contest this designation in court, emphasizing the challenges that could arise from this situation. On a broader scale, major cloud providers, including Amazon, Microsoft, and Google, have pledged to continue offering Anthropic's services for non-defense applications. In a notable collaboration, Palantir and Amazon Web Services teamed up with Anthropic in November 2024 to integrate Claude models into AWS, making them accessible for defense and intelligence operations. Additionally, Anthropic secured a $200 million contract with the Department of Defense last year, becoming a pioneer in integrating its models into classified networks. Analysts from Piper Sandler highlighted Anthropic's role as a leader in the AI sector, particularly in data-sensitive government environments, underscoring the potential complications of replacing its technology. Despite these challenges, they maintained a buy rating for Palantir, setting a price target of $230, while acknowledging the complexity of re-establishing AI functions within the company. Palantir's stock rally this week also aligns with a broader recovery in the software sector, which has faced challenges in recent months due to fears surrounding AI disruption. The iShares Expanded Tech-Software Sector ETF saw an impressive rise of nearly 8%, with companies like CrowdStrike, ServiceNow, and AppLovin all experiencing gains exceeding 15%. The market dynamics suggest a shift, as noted by analyst Gil Luria, indicating that the market may be stabilizing after a period of significant shorting in software stocks.