Could This Under-the-Radar Artificial Intelligence (AI) Defense Company Be the Next Palantir?
Key Takeaways
Palantir has emerged as a disruptive force in the AI realm, ushering in a wave of enthusiastic investors to the defense tech space.
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July 19, 2025
12:30 PM
The Motley Fool
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What caught my attention is Palantir has emerged as a disruptive force in the AI realm, ushering in a wave of enthusiastic investors to the defense space
Nevertheless, Palantir nologies was the top-performing stock in the S&P 500 and Nasdaq-100 during the first half of 2025
With s soaring by 80% through the first six months of the year -- and by 427% over the last 12 months -- Palantir has helped drive a lot of attention to the intersection of artificial intelligence (AI) and defense contracting
Palantir is far from the only company seeking to disrupt defense
A little-known competitor to the company is BigBear
Additionally, Ai (BBAI -3
However, 29%), whose s are up by an impressive 357% over the last year
At the same time, Ai emerge as the next Palantir
Additionally, Read on to find out (which is quite significant)
Ai is an exciting company in the world of defense, but (noteworthy indeed)
Ai's price volatility so far this year mimics the movements of a rollercoaster
Furthermore, Initially, s rose considerably shortly ing President Donald Trump's inauguration and the subsequent announcement of ject Stargate -- an infrastructure initiative that aims to invest $500 billion into AI jects through 2029
Moreover, BBAI data by YCharts However, these early gains retreated ing the Pentagon's plans to reduce its budget by 8% annually
On the other hand, While reduced spending from the Department of Defense (DOD) was initially seen as a major blow to contractors such as Palantir and BigBear
Nevertheless, Ai, the trends illustrated above suggest that s rebounded sharply -- implying that the sell-offs back in February may have been overblown
In my eyes, a major contributor to the recovery in defense stocks came after Defense Secretary Pete Hegseth announced his intentions to double down on a strategy dubbed the Software Acquisition Pathway (SWP)
Conversely, In reality, the DOD's budget cuts are focused on areas that are deemed non-essential or inefficient
Additionally, For example, the Pentagon freed up billions in capital by reducing spend with consulting firms such as Booz Allen Hamilton, Accenture, and Deloitte
In addition, a contract revolving around an HR software system managed by Oracle was also cut
Under the SWP, it appears that the DOD is actually looking to free up capital in order to double down on more -focused initiatives and identify vendors that can actually handle the Pentagon's sophisticated workflows (which is quite significant)
With so much opportunity up for grabs, it's ly that optimistic investors saw this as a tailwind for BigBear (something worth watching)
However, This logic isn't too far off base, either
Ai's CEO is Kevin McAleenan, a former government official with close ties to the Trump administration, in today's financial world
Furthermore, However, McAleenan's strategic relationships within the government combined with the DOD's focus on working with leading software services viders ly has some investors buying into the idea that BigBear
Moreover, Ai won't be flying under the radar much longer, amid market uncertainty
Additionally, Image source: Getty Images
How does the company really stack up beside Palantir, amid market uncertainty
The graph below breaks down revenue, gross margin, and net income for BigBear
Ai over the last year
Furthermore, With just $160 million in sales, the company tends to generate inconsistent gross margins -- which top out at less than 30%
Moreover, with a fairly small sales base and unimpressive margin file, it's not surprising to see BigBear
Ai's losses continue to mount
At the same time, BBAI Revenue (TTM) data by YCharts By comparison, Palantir generated $487 million in government revenue during the first quarter of 2025
In other words, Palantir's government operation generates nearly triple the amount of revenue in a single quarter that BigBear
Ai does in an entire year, given the current landscape
On top of that, Palantir's gross margins hover around 80%, while the company's net income over the last 12 months was over $570 million
Nevertheless, Is BigBear, in light of current trends
Ai stock a buy right now
Nevertheless, Right now, BigBear, in this volatile climate
Additionally, Ai trades at a price-to-sales (P/S) ratio of around 11 (fascinating analysis), considering recent developments
While this may look "cheap" compared to Palantir's P/S multiple of 120, there is a reason for the valuation disparity between the two AI defense contractors, in light of current trends
Additionally, Palantir boasts large, fast-growing public and private sector es that command strong fit margins
By contrast, BigBear, given current economic conditions
Ai is going to have a difficult time scaling so long as it keeps burning through heaps of cash, in today's market environment
Not only would I pass on BigBear
Additionally, Ai stock, but I also do not see the company becoming the next Palantir
Palantir is in a league of its own in the defense space, and I do not see BigBear, considering recent developments
Ai as a formidable challenger
On the other hand, Adam Spatacco has positions in Palantir nologies
The Motley Fool has positions in and recommends Abbott Laboratories, Accenture Plc, Oracle, and Palantir nologies, amid market uncertainty
The Motley Fool has a disclosure policy (an important development).
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