Palantir’s Latest Deal Could Put a Freeze on Its Stock Price

Key Points

• Palantir's partnership with ICE includes a new $30 million deal to expand ICE’s ability to track individuals, raising concerns about surveillance and fundamental rights.
• Palantir’s business supports Western values and the U.S. military but faces volatility due to institutional sentiment, which may act as resistance on the stock price.
• Valuation is still investors' biggest concern, and the reason investors should continue to expect PLTR stock to be volatile in the short term.

In its most recent earnings report, Palantir Technologies Inc. NASDAQ: PLTR announced that it had signed 139 deals valued at least $1 million. That wasn’t surprising to long-term investors. In its last quarter, Palantir seemed to sign a new deal every other day.

That momentum has continued since the earnings report. However, one of Palantir’s latest contract wins focuses on why many investors find the company’s stock hard to stomach. And this reason has nothing to do with its premium valuation.

Palantir and the U.S. Immigration and Customs Enforcement (ICE) agency announced a new $30 million deal. The deal will help expand ICE’s ability to track individuals accused of violent crimes as well as individuals who have stayed in the country after their visas have expired.

Palantir has been working with ICE since 2014. In fact, its partnership with the agency is one reason many investors object to owning the company’s stock. If that’s the case, this expansion of the partnership won’t do much to encourage them.

Critics Fear the Growth of a Surveillance State

Under the agreement, Palantir is building an upgraded system for ICE, called “ImmigrationOS.” The new system will pull all the information that ICE agents need, from identification through arrest and deportation. The goal, as written into the contract, is to save ICE time and reduce costs while increasing the number of deportations to meet the Trump administration’s goal of removing one million people from the U.S. in 2025.

The system can identify individuals even before ICE officials receive an official deportation order, enabling quiet tracking of those instructed to “self-deport.” It also aggregates data from multiple sources, which can help agents identify potential visa violations and make arrests.

The approach has raised concerns from advocacy groups and legal experts about the potential for wrongful arrests, deportations, and civil liberties violations.

Leaked internal documents show that Palantir is aware of certain risks and limitations beyond its control. Nonetheless, the company is proceeding with the project, which is scheduled for delivery by the end of September.

Supporters Know What They Own

Many current Palantir shareholders have held the stock since its public debut in 2020, when the company’s operations were less transparent than they are today. Despite changes in visibility, the company’s stated mission and values have remained consistent.

Palantir positions itself as a supporter of Western democratic institutions and a strong U.S. defense sector enhanced by advanced technology. This stance appears to align with the priorities of the U.S. Department of Defense, which is expected to maintain Palantir’s existing contracts even as it seeks to reduce waste and inefficiency.

When asked about potential cuts to its government contracts on the company’s most recent earnings call, co-founder and chief executive officer Alex Karp noted that Palantir “does exceptionally well when things are pen-tested.” Adding that the company likes it when there is pressure on the system. That makes sense because Palantir is about making operations more efficient, including controversial ones like those carried out by ICE.

Volatility Is the Only Certainty

For now, this story may not get much attention from retail investors. Since the company’s earnings report, more attention has been paid to the company’s valuation. With that in mind, some analysts are concerned about a lack of international growth in the company’s business. However, the company's recent deal with NATO may be the first step in overcoming these objections.

The announcement of, at least, the framework of a trade deal with China is sending technology stocks like Palantir sharply higher. Temporarily, that may keep the stock moving higher. However, in early trading on May 12, PLTR stock was already showing signs of hitting resistance.

That makes sense because PLTR stock is not really a tariff trade. That means investors may be setting a higher bar for the stock. If that bar includes weaker institutional sentiment due to the ICE deal, investors should expect volatility in the coming months.