Salesforce has not too long ago launched a brand new enterprise unit, Missionforce, which is able to deal with nationwide safety.
The corporate’s CEO believes Palantir’s software program is overpriced.
Palantir’s progress price has been accelerating over the previous 12 months, however a slowdown may very well be inevitable.
10 shares we like higher than Palantir Applied sciences ›
Palantir Applied sciences (NASDAQ: PLTR) has been an unstoppable inventory to personal lately. It’s a trusted companion for the U.S. authorities and it has additionally been rising its business enterprise at a quick tempo, thanks largely to the success of its Synthetic Intelligence Platform (AIP). Previously 12 months, Palantir’s inventory has risen an astounding 380%.
However there could also be hassle forward. There’s loads of competitors within the area and it might have an enormous rival to fret about, one which’s specializing in nationwide safety and which will undercut it on worth.
Picture supply: Getty Photographs.
Gross sales and advertising big Salesforce (NYSE: CRM) is an enormous title in knowledge analytics. Its software program helps join companies to prospects, enabling them to enhance their operations and develop their gross sales. It has additionally been leveraging AI and now provides AI brokers that it says can present companies with entry to a digital labor power so as to add much more effectivity.
Salesforce is not stopping there, nonetheless. It took discover of Palantir’s success in specializing in nationwide safety efforts and it has not too long ago launched a brand new enterprise unit, which is named Missionforce. The corporate says that its purpose is “to assist our warfighters and the organizations that assist them function smarter, quicker, and extra effectively.”
And this is probably not only a small and delicate transfer. Salesforce may even see a possibility to undercut Palantir with Missionforce. CEO Marc Benioff mentioned that Palantir’s software program was “the most costly enterprise software program I’ve ever seen,” suggesting that Salesforce could possibly justify elevating its personal costs and nonetheless be aggressive.
Palantir has been a fascinating inventory to personal given its accelerating progress lately, which is why many retail buyers see it as being unstoppable.
PLTR Income (Quarterly YoY Progress) knowledge by YCharts
The priority I’ve, nonetheless, is what would possibly occur when that progress inevitably slows down? The joy continues to be extraordinarily excessive across the enterprise immediately and its market cap stays large at $424 billion, whereas Salesforce is price round $230 billion.
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There’s some appreciable draw back threat with Palantir’s inventory simply as a result of how extremely costly it’s. It trades at price-to-earnings (P/E) a number of of almost 600. Salesforce, in the meantime, trades at a P/E of 35, which is already costly provided that buyers are paying 25 instances earnings for the typical inventory on the S&P 500. Each of those AI shares are overpriced, however Palantir’s valuation is at an obscene degree.
The launch of Missionforce could not essentially steal numerous prospects away from Palantir, nevertheless it’s an instance of the rising threat that the corporate could face in the long term from different knowledge analytics corporations. Competitors can drive costs down and chip away at Palantir’s margins. It can lead to much less earnings progress and the issue is that with such an especially excessive valuation, there’s nearly no margin of security for buyers who purchase the inventory immediately; there’s lots of draw back threat.
Palantir has been a sizzling inventory for retail buyers lately however that does not imply that it’s going to proceed rising without end. In some unspecified time in the future, there’ll probably be a correction because the inventory’s fundamentals are disconnected from its valuation as that is undoubtedly one of the overpriced shares in the marketplace. Should you’re shopping for Palantir’s inventory at its present ranges, you are taking on appreciable threat.
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David Jagielski has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Palantir Applied sciences and Salesforce. The Motley Idiot has a disclosure coverage.
Palantir Applied sciences Faces a New Menace: This Synthetic Intelligence (AI) Firm Simply Launched a New Enterprise Unit That Focuses on Nationwide Safety was initially revealed by The Motley Idiot