Key Points

• Wedbush analyst Dan Ives sees Palantir's valuation hitting $1 trillion within three years.

• Ives is bullish on a number of AI sector stocks.

• While Palantir has the growth potential to get there, the valuation adds a significant risk to the stock.

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Palantir Technologies (NASDAQ: PLTR) has been one of the top-performing stocks of the artificial intelligence (AI) era.

Since the start of 2023, the deep data analytics company has returned nearly 2,000% as it's gone from a slow-growth, unprofitable company to a fast-growing, highly profitable business. That transition is largely due to the launch of its Artificial Intelligence Platform (AIP), which provides an AI layer over its other software analytics platforms like Foundry and Gotham, allowing users to easily retrieve data and gain insights by using AI chatbot interfaces that AIP connects to.

Palantir's stock growth has come not just from the strong performance in the business, but also from significant multiple expansion. On a price-to-sales basis, Palantir now trades at a sky-high ratio of 105, a level typically reserved for highly speculative growth stocks.

Given that valuation, there are clear questions about whether Palantir can continue to deliver market-beating returns to investors as its market cap has topped $300 billion, making it the most valuable pure-play software company on the stock market.

However, one Wall Street analyst thinks that Palantir can not only outperform the S&P 500, but more than triple to $1 trillion.

Palantir's path to $1 trillion

Wedbush's Dan Ives is one of the biggest AI bulls on Wall Street as he has cheered on stocks like Tesla, Nvidia, and Apple. However, his recent forecast for Palantir stock may be his boldest one yet.

Following a sell-off in Palantir stock after its first-quarter earnings report in early May, Ives went on CNBC and predicted that Palantir would reach a valuation of $1 trillion in two to three years.

"They are leading when it comes to the AI revolution," said Ives, and he has noted recent wins like selling its Maven Smart System to NATO. Ives also raised his price target on Palantir from $120 to $140 and maintained an outperform rating.

The Wedbush analyst didn't give many specifics in his trillion-dollar forecast, though his prediction seems to be more based on the general growth of AI and Palantir's status as a leading data platform as he's also bullish on a number of other AI stocks.

However, a recent news report indicated one key tailwind in Palantir's favor. According to a detailed report in The New York Times, the Trump administration has expanded the federal government's relationship with Palantir. The government, which is by far Palantir's biggest customer, is calling for agencies to share data with each other using Palantir's platforms, a move being pushed by the efficiency and cost-cutting effort known as the Department of Government Efficiency.