With its shares up 84% year to date, Palantir Technologies (NYSE: PLTR) has been having a good run, especially after better-than-expected second-quarter earnings show accelerating growth following the rollout of new generative artificial intelligence (AI) tools. Let's discuss how this opportunity could develop over the next three years and determine if Palantir can grow into its uncomfortably high valuation.

The last few weeks have not been kind to AI companies, especially on the hardware side of the opportunity. Industry leaders like Nvidia, Advanced Micro Devices, and Super Micro Computer have fallen significantly from all-time highs amid concerns that this new technology may be more hype than substance. However, Palantir's impressive second-quarter earnings help make the case for continued investment.

Total revenue increased 27% year over year to $678 million. But while Palantir is mainly known for its government and defense contracting, its smaller U.S. commercial segment may be finally coming into its own, expanding 55% to $159 million to represent just over 20% of the total.

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Source Fool.com