It’s a tough time to be an investor right now. New tariff policies from the Trump administration have investors rattled, and the declines seen across the S&P 500 and Nasdaq Composite are becoming more disorienting by the day. As of this writing (April 7), the Nasdaq has dropped by 20% this year while the S&P 500 is down by 14%. Technology companies have been some of the hardest-hit stocks during the sell-off. In particular, once-hot names in the artificial intelligence (AI) sector have become ice cold in just a matter of days.
As a contrarian who primarily invests in the technology sector, I’ve recently been asking myself, “Are there any technology companies that could actually benefit from Trump’s taxes?” I’ve been giving a lot of thought to software companies in particular. Many software businesses do not import or export physical goods, and so for the most part, tariffs shouldn’t hurt their business in a direct way.
While this logic opens the door to a number of interesting opportunities in the software realm, I’m honing in on one specific name. I contend that Trump’s tariffs could serve as an unlikely tailwind for data analytics platform Palantir Technologies (PLTR -0.62%).
Could Palantir be a hidden gem amid the market turmoil? Let’s dig in and find out.
How could Palantir benefit from tariff policies?
Tariffs are taxes placed on imports and exports. While they are generally assessed on certain products or industries, the Trump administration’s tariffs take aim at all goods coming from individual countries. This will likely have significant repercussions on global trade and the prices consumers pay for all sorts of goods.
With that in mind, it’s natural to wonder how businesses can plan for tariffs and the effects they may have on supply chains, vendor sourcing, and pricing strategies. This is where Palantir can help. By leveraging the company’s Foundry and Artificial Intelligence Platform (AIP) suites, companies can leverage their various datasets to build detailed ontologies. Palantir describes an ontology as a “knowledge scaffolding” — essentially a synthesized digital mapping of a company’s data and processes.
In essence, these ontologies can help business leaders build dynamic models that show in real time how tariffs impact costs and profit margins. Taking this a step further, Palantir’s AI programs can help decision-makers with important next-step processes such as identifying alternative suppliers and building new production timelines, which are important factors when considering how delivery logistics and pricing strategies could fluctuate.
I see the tariff use case as more of an opportunity for Palantir to get its foot in the door with more potential customers. In other words, Palantir’s use cases span far more than just financial planning around tariff policy. The company’s products are deployed across industries such as healthcare, aviation, energy, defense, and more.
Given tariffs present challenges for businesses across all industries around the globe, Palantir has a unique chance to showcase its AI software platforms and use this moment as a means to acquire new business as corporations scramble to figure out a game plan that factors in these new policies.
Image source: Getty Images.
Is now a good time to buy Palantir stock?
The chart below illustrates trends in Palantir’s price-to-sales (P/S) ratio over the last year. While the company’s current P/S of 66 is about 37% off prior highs seen earlier this year, Palantir still trades at a significant premium compared to its 12-month average P/S multiple.
Data by YCharts.
Palantir stock isn’t necessarily trading at a bargain, but the ongoing tech sell-off has certainly led to some degree of normalization in the company’s valuation. While Palantir stock is on sale right now, the stock still isn’t cheap — the trends above underscore the significant valuation expansion the company has experienced over the last year.
I am cautiously optimistic that Palantir could shock investors throughout the year by showcasing its ability to sell a leading suite of AI-powered software tools during an otherwise turbulent economic period. For this reason, I think now is an opportunity to use dollar-cost averaging in this pricey growth stock with the intention to hold for the long term.
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