AI application software shares jumped in Wednesday trading.

Tempus AI up 9%; Shopify up 6%; Palantir, AppLovin, BigBear.ai up 5%; Unity up 4%; Roblox, SoundHound AI up 3%; Figma up 2%.

Palantir Technologies’ stock has been a cult favorite among retail investors, but Wall Street analysts have been turned off by its high valuation.

But now that shares have tumbled 25% since the beginning of the year, analysts are starting to change their tune.

Mizuho analyst Gregg Moskowitz upgraded Palantir’s stock to outperform from neutral on Wednesday, citing a more attractive risk/reward outlook for a business that “is in a category of one, delivering total revenue growth, acceleration and margin expansion at scale that is unlike anything else in software.” He kept his price target of $195 unchanged.

The stock decline has led Palantir’s 2026 multiple of enterprise value to free cash flow to compress 46% in the last six weeks, according to Moskowitz. The company now trades at 83x estimated free cash flow.

Moskowitz called this development “unjustifiable,” pointing to the company’s “Rule of 120+” status. That refers to how the sum of Palantir’s revenue growth and free-cash-flow margins reached 127 last quarter, more than double the score of any other software company Mizuho tracks. He believes Palantir can trade at 122x estimated free cash flow for 2026 and 87x for 2027.

Last quarter, Palantir’s U.S. commercial revenue surged 137% year over year to account for 36% of total sales, up from 26% just a year ago. Management is guiding for at least 115% growth in that segment for 2026, a figure Mizuho believes could still see upside. In its government division, Palantir can continue to grow revenue at 40% or higher for the next two years, according to Moskowitz.

As software stocks are caught in a widespread selloff on fears of artificial-intelligence disruption, Moskowitz notes that Palantir is the only company among its peers that has already seen estimates move significantly higher this year.

Palantir bears have argued that the company is just an “AI wrapper” on top of existing large language models, making its technology a middleman that could be easily replaced or cut out. Moskowitz called this view “overly reductive,” arguing that Palantir competes at the operational layer instead of the model layer by organizing siloed enterprise data and embedding AI into workflows.

“In practice, enterprises face no challenge accessing models, but they very much struggle today in deploying them reliably on sensitive data, at scale, with auditability, and with clear accountability for outcomes,” Moskowitz wrote. “This is where [Palantir’s] platform remains very difficult to replicate, in our view.”

Moskowitz’s projections for Palantir place it at a 2.5x premium to the median high-growth software free-cash-flow multiple for 2027. However, he believes the valuation premium is warranted given the company’s “strong strategic positioning and potential for further accelerated growth.”

The share of analysts who give Palantir a buy or buy-equivalent rating has risen to 57% from just 25% in December, according to FactSet.