By Mackenzie Tatananni
Palantir Technologies is off to a rocky start this year, but that isn't shaking Morgan Stanley's confidence in the company. The firm says Palantir is "one of the few AI winners in software."
The stock is down more than 13% in 2026, a reversal from 2025 when shares of the data analytics company more than doubled, beating the Nasdaq Composite's 20% gain. While the enthusiasm around AI that propelled Palantir and other tech companies last year has waned, the analysts at Morgan Stanley say Palantir's competitive footing is unshakable.
The reason? Palantir's ontology, the core architecture within its main platforms like Foundry and Gotham. Analysts and Palantir refer to the ontology as an organization's "digital twin," where data is mapped onto real-world objects. Essentially, the tool allows an enterprise to make sense of what would normally be spreadsheets and databases.
The architecture "improves interpretability by allowing users to work in familiar business terms rather than technical concepts like tables and joins," Morgan Stanley analysts explain in a Friday research note. New applications and workflows can be built on top of an existing ontology instead of requiring a new integration and data-modeling effort each time.
Morgan Stanley says this is essential to ensuring Palantir's competitive advantage over other players in the data analytics space.
The moat, as Morgan Stanley describes it, is partly due to the architecture's complexity. "While we have tried to simplify the underlying concepts behind the Ontology model, building and implementing an Ontology in a large enterprise is a laborious process," the analysts say. Palantir's software engineers who work directly with customers are a crucial part of this.
Conversations Morgan Stanley has had with industry sources indicate that "simply uploading a data schema or attempting to use an AI engine to automate Ontology development without deep semantic understanding of the business will lead to operational failure."
The firm rates Palantir at Equal Weight with a $205 price target. While Morgan Stanley is sidelined for now, it believes the company's "fundamental momentum" is strong.
"Our early checks point to sustained momentum in the U.S. and we are growing in our optimism that Foundry will emerge as one of the dominant software platform in enterprise software," analysts write.
Palantir stock slipped 1.2% to $153.78 on Friday, compared with a 1% loss for the Nasdaq. The stock traded as high as $207.52 in November 2025, but has fallen nearly 26% from those levels.
Concerns over Palantir's lofty valuation have been a persistent sticking point. As of Thursday, Palantir was trading at 110.40 times forward earnings. The Nasdaq and benchmark S&P 500 index had forward price-to-earnings ratios of 23.84 and 20.23, respectively.
Write to Mackenzie Tatananni at mackenzie.tatananni@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 20, 2026 13:59 ET (17:59 GMT)
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