Palantir (PLTR) and other defense contractors are taking part in an investment round in artificial intelligence start-up Shield AI, it has been reported.
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According to the Financial Times, Shield is raising around $200 million from defense companies including PLTR, Airbus (EADSF) and L3 Harris (LHX), in a deal that values the start-up at $5 billion.
Separately, The Information reported that Lockheed Martin (LMT) is also involved in the investing round.
Shield AI manufactures drones and software that enables aircraft to fly autonomously, without the need for a pilot, communications or GPS. The Hivemind AI pilot software is used by rival companies as it can be integrated with existing aircraft.
PLTR Looks to Win Pentagon Contracts
It comes as legacy defense companies are seeing a lot more competition from new tech firms in the lucrative world of U.S. defense contracts.
Last month, the FT reported that PLTR had joined forces with Anduril, another defense tech company, to form a consortium with other tech companies to jointly bid for Pentagon contracts.
The U.S. Army recently awarded PLTR a $400 million contract to continue providing its artificial intelligence-enabled Vantage system. And in September, the company won a $100 million contract to expand access to its AI-powered digital target tech platform.
PLTR Faces Multiple Compression Risk
Jefferies analyst Brent Thill sounded a cautious note in a research update this week, citing PLTR high enterprise value to next-12-months of revenue multiple.
“We are now in a more normalized macro environment, and we think any negative factors (changing interest rates, AI hype turns, insider selling, etc) may cause PLTR’s multiple to further compress,” he said in a note, sticking to a Sell rating on PLTR stock and the price target of $28.
Is PLTR a Good Stock to Buy?
Overall, Wall Street has a Moderate Sell consensus rating on PLTR stock, based on two Buys, 10 Holds and seven Sells. The average PLTR price target of $48.27 implies over 30% downside potential from current levels. Shares of PLTR have risen more than 300% in the last 12 months.
