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No technology company of our time inspires as much hope and fear as Palantir (NASDAQ:PLTR). This is true for its technology, a deep learning database used primarily by the military. Its also true for PLTR stock and its prospects.

Bulls see Palantir worth $50 per share, bears barely $10. (It was selling at $26 on July 24.)

When it comes to technology, optimists see Palantir as a revolutionary defender of freedom and a magic bullet for productivity. Pessimists see Palantir as an overhyped, dangerous, authoritarian scam.

I believe its none of those things. I also believe its a speculative buy for a young investor.

Lets take a closer look.

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Palantir happily took the label of Artificial Intelligence after ChatGPT arrived. At the time the stock was selling for under $8 and the company was struggling to define itself as a data analysis company.

Its more of a Machine Internet company. It combines whats known about all your assets and offers strategic insights into deploying them, in real time.

The Pentagon loves it. Every month, it seems, Palantir is bagging another major contract, with more secret information being made available to more people. The latest is a $480 million, five-year deal for Maven, fusing data from intelligence, surveillance and reconnaissance systems.

Palantirs software can identify and optimize what our side has while identifying and strategizing against what the other side has. Dan Ives of Wedbush sees it worth $50 per share.

There are also civilian applications, for both government and commercial accounts. The company has strong relationships with both Oracle (NASDAQ:ORCL) and Microsoft (NASDAQ:MSFT). Its ability to coordinate hospital work won it a deal with Englands National Health Service last year.

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The pessimistic view starts with Palantir being primarily a military contractor.

Most military contractors have limited growth but are highly profitable because its difficult to get out of the military box. Palantir grew just 17% last year and has only been marginally profitable for about a year. While it was earning profits last year, it also had very negative cash flow, $1.78 billion worth.

Palantirs selling point with the military is that it is highly-proprietary system. Thats great if youre in the secrets business. Its not so great if youre a hospital or if something is broken and you need to fix it.

While other defense software contractors sell for 13-15 times sales, Palantir sells for closer to 26 times sales, even amid the latest sell-off. Its also vulnerable to what Gartner (NYSE:IT) calls the trough of disillusionment, the realization that AI may not fully justify the current hype.

CEO Alex Karp, who despite doing a good job seems overpaid at $1.1 billion, brags about Palantirs commercial revenue growth in his most recent stockholder letter, but its still just 24% of the business. Palantir remains and likely will always remain a military-first company. Thats why analysts have been saying it is priced to perfection. Thats analyst-speak for limited upside.

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Most AI companies remain focused on the interface between people and data. I like the fact that Palantir is focused on the interface between machines and data.

Its this interface that gives Palantir value and should give speculators at sites like Stocktwits hope. The best AI systems today arent focused on replacing people so much as doing what people cant. People cant yet penetrate the fog of war.

Its by sticking to a clear, coherent strategy that the best companies, and generals, win. Palantir has that. The question is whether it has enough runway, earned serving the war machine, to justify its valuation.

This depends on its ability to grow the commercial side of the business. Look closely at those numbers when it next reports Aug. 5. If theyre good, go long.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.

As of this writing, Dana Blankenhorn had a LONG position in MSFT. The opinions expressed in this article are those of the writer, subject to theInvestorPlace.comPublishing Guidelines.

Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technologys Big Bang: Yesterday, Today and Tomorrow with Moores Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his free Substack newsletter.

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PLTR Stock Outlook: Is Palantirs AI Hype Worth the Premium? - InvestorPlace