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. Could BigBear. 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. Why is that.
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).