After Palantir (PLTR) announced on March 25 that it had made a deal to provide NATO with an AI system meant to boost the alliance's fighting prowess, Wedbush's Dan Ives believes that the news is meaningfully positive for PLTR stock.

The prominent analyst kept a $120 price target and an Outperform rating on the shares.

Why Ives Is Excited About the Deal

The analyst thinks that the agreement, which will enhance NATO's data management, intelligence usage, and decision making, is a major achievement for the company, as it suggests that the firm continues to be viewed positively by Washington. In particular, PLTR's prowess in AI continues to be appreciated by the U.S. government, according to Ives.

Moreover, PLTR is executing well and is likely to benefit from strong demand for help in implementing AI systems, the analyst contended.

Indeed, Ives expects PLTR to get a significant lift from "a tidal wave" of federal expenditures on AI.

The Recent Price Action of PLTR Stock

In the last month, the shares have climbed 6%, while they have surged 43% in the last three months and 323% in the last 12 months.

While we acknowledge the potential of PLTR, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than PLTR but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.