It’s no secret that over the last couple of years investors have become increasingly curious about the prospects artificial intelligence (AI) presents. With that said, I’ve found a lot of the discussion around AI to be largely redundant.
Software companies are touting how AI-powered services can yield higher productivity levels in the workplace, while hardware and infrastructure players essentially hold the keys to the AI car through the power of data centers and semiconductor chips.
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More recently, however, I’ve started reading about AI’s role in the military. I already knew that Palantir Technologies(NYSE: PLTR) was a major player at the intersection of AI and the public sector. However, a recent announcement out of Meta Platforms(NASDAQ: META) has me thinking about AI defense applications in a new way.
Below, I’ll detail why Meta’s new partnership with Palantir is so important. Furthermore, I’ll assess which stock I see as the better buy at the moment as the military AI movement heats up.
One of the biggest breakthroughs from the AI revolution so far is the introduction of the large language model (LLM). While there are a host of LLMs on the market, OpenAI’s ChatGPT is probably the one you’re most familiar with.
Anecdotally, I have found working inside of ChatGPT quite entertaining. I use the LLM to help me answer questions if I don’t have the patience to scroll through Google, and from time to time, I’ve even used it to help me write some software code for personal projects.
Unbeknownst to me, LLMs have far more power than enhancing productivity output or answering questions with the click of a button. According to a recent press release from Meta, the company’s Llama AI model is making its way into the U.S. government and adjacent contractors in the private sector.
According to the announcement, LLMs “have helped to accelerate defense research and high-end computing, identify security vulnerabilities and improve communication between disparate systems.”
I guess I never really gave the idea much thought, but the military shares a lot of overlap with the private sector when it comes to operational pain points. But with that said, the military isn’t just focused on efficiency — safety is its prime concern. According to Mordor Intelligence, the total addressable market size for AI analytics and robotic processing services in the defense sector will be worth more than $60 billion over the next five years.
As part of its deployment of Llama into the public sector, Meta announced that it’s partnering with none other than Palantir. Below, I’ll detail some valuation trends and additional talking points about Meta and Palantir, and assess which stock looks like the best opportunity at the moment.
Image source: Getty Images.
Meta’s AI thesis is pretty straightforward. The company owns a number of social media platforms including Facebook, Instagram, and WhatsApp. Moreover, Meta also has a budding operation focused on virtual reality, gaming, and the metaverse.
On the social media side of the equation, Meta sits in a lucrative position to leverage AI in such a way that helps it understand its user base on an even deeper level. In turn, Meta can improve its targeted advertising campaigns, which theoretically should yield higher engagement across its platforms. In addition, offering a unique suite of virtual reality and gaming products opens the door to a whole new cohort of users on the platform, all while diversifying the company’s advertising-heavy business model.
I see Meta branching into the defense space and expanding its AI capabilities across the public sector as a big deal and a savvy choice to diversify its long-term roadmap. Yet, despite these appealing tailwinds, Meta’s price-to-earnings (P/E) ratio of 27 is historically low. I think investors might be overlooking several big catalysts, making now an ideal time to buy Meta stock hand over fist.
Palantir has become one of the biggest profiles in AI over the last year. Following the release of the Palantir Artificial Intelligence Platform (AIP) in April 2023, the company has swiftly entered into a renaissance hallmarked by accelerated customer acquisition, revenue growth, and consistent profitability.
Palantir’s transformation hasn’t gone unnoticed, either. Earlier this year the company announced a partnership with cloud computing specialist Oracle, as well as a deal with Microsoft that marries AIP with Microsoft’s Azure cloud infrastructure across U.S. defense agencies.
All of these developments, while impressive, have made a noticeable impact on Palantir’s share price. As I write this, shares of Palantir have gained over 240% this year — making it the second-highest-performing stock in the S&P 500.
With a market capitalization of roughly $140 billion and a price-to-sales (P/S) multiple of 53, I have to say that Palantir stock has gotten out of hand.
If you’ve read my prior pieces about Palantir then you’ll know that I am incredibly optimistic about the company’s future and I fully intend to remain a shareholder. But right now, there is just too much momentum fueling Palantir shares and its valuation has become disconnected from reality. For these reasons, I’d pass on Palantir for now but would encourage investors to be on the lookout for any sell-offs that could occur and use those as opportunities to buy the dip.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Meta Platforms, Microsoft, and Palantir Technologies. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, Oracle, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
