Why Palantir Technologies Popped 12% This Week

What happened

Shares of Palantir Technologies (NYSE:PLTR) are up 11.9% this week as of 3:40 p.m. ET Thursday, according to data provided by S&P Global Market Intelligence, after the U.S. Army awarded the company a new $250 million contract focused on AI and machine learning.

So what

According to an article published on Tuesday, Sept. 26, 2023 by the U.S. Department of Defense (DoD), Palantir was awarded the $250 million firm-fixed-price contract "to conduct research and development services in the area of artificial intelligence and machine learning."

Palantir did not disclose additional details surrounding the award -- which shouldn't come as a surprise given the secretive nature of its military technology -- but a company spokesperson did state that it will build upon work being done at the Army Research Lab (ARL) under a $229 million contract extension awarded to Palantir almost a year ago. That contract was an extension of a relationship Palantir has maintained with the ARL since 2018.

Now what

The DoD elaborated that exact work locations and funding will be determined with each order under the latest contract -- so investors won't be able to precisely model when revenue will be recognized on a quarterly basis. But with an estimated completion date of Sept. 25, 2026, this is obviously an incremental positive and a validating win for Palantir as the company solidifies its status as an indispensable ally in the Army's efforts to advance its artificial intelligence capabilities. It's no surprise, then, to see shares of the leading AI stock rallying nicely in response this week.

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Steve Symington 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.