If you had bought into the AI-powered data analysis firm Palantir two years ago, your return to date would be in the neighborhood of 930%. Gains like that are sure to catch headlines and attention – and Palantir has had its share of both. The company has benefited from its combination of AI savvy and a solid client base in the US Defense Department.
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Yet, as impressive as those gains have been, Palantir’s stock is now viewed as too richly valued to offer an attractive risk–reward. That leaves investors wondering which AI stock might be next in line.
To answer that, it helps to understand the profile that has worked so well for Palantir. The closest comparisons are likely to be found among AI-centered companies with a heavy emphasis on government contracts and strong capabilities in tailoring software and data platforms for mission-critical use. These are firms whose products can scale, thrive under multi-year indefinite-delivery, indefinite-quantity agreements, and pivot alongside shifting objectives.
That may sound like a tall order, but there are several candidates that fit the bill. The Washington Beltway, Northern Virginia, and suburban Maryland are packed with tech-focused government contractors that may not yet match Palantir in size or visibility, but are well-positioned to grow into far more influential players in the years ahead.
With that in mind, we turned to the TipRanks database to pinpoint two such names. Here’s a closer look at how they compare to Palantir – and what analysts are saying about their potential.
CACI International (CACI)
First up is CACI, an information technology firm based in Reston, Virginia – pretty much ground zero for government contract agencies. CACI provides a wide-ranging set of expert skills and knowledge for its customers, particularly in fields related to national security, and its services are in high demand from US government agencies. The company has solid connections with the Departments of Defense and Homeland Security, and it is also known for its work with intelligence community agencies.
Leveraging those relationships, CACI delivers a broad portfolio of specialized services that extend well beyond traditional IT. Its offerings span applied engineering, cybersecurity, data management, enterprise IT, and military mission support. The company’s reach even extends into the space program, outsourced expertise in finance and HR oversight, and critical supply management. In many cases, it has acted as a watchdog for government departments, giving it an entrenched position within the federal ecosystem.
In recent years, CACI has expanded its core competencies with AI and machine learning to enhance mission execution. These tools have practical applications across business systems and intelligence, and on the security side, they are being integrated directly into intelligence workflows. A case in point came in December 2024, when the National Geospatial-Intelligence Agency awarded CACI its five-year Luno-A contract. Valued at up to $290 million, this IDIQ award brings CACI’s AI and computer vision capabilities squarely into the analysts’ toolkits.
That approach mirrors Palantir’s “software in the mission” model, showing how CACI can scale its solutions across major Defense Department programs. The company has already demonstrated success in winning repeat business, such as the second phase of its Counter Uncrewed Aircraft System project with the Canadian Armed Forces, a $124 million award announced just last month.
Of course, CACI is still a fraction of Palantir’s size – with a $10.55 billion market cap compared to Palantir’s $371.77 billion – but that gap underscores the opportunity. If CACI continues landing AI-driven contracts like Luno-A, it has significant room for growth and compounding gains.
The company’s fundamentals are already backing up that potential. In its fiscal 4Q25 report (for the quarter ending June 30), CACI posted $2.3 billion in revenue, up 13% year-over-year and modestly ahead of expectations. Non-GAAP EPS of $8.40 was up 27% and exceeded estimates by $1.82 per share. The momentum extended to the full fiscal year, with revenue of $8.6 billion (up 13%) and $9.6 billion in new contract awards.
This company’s solid past performance and its strong prospects for continuing that performance caught the attention of Stifel analyst Jonathan Siegmann, who writes: “CACI is continuing to operate well with sustained orders and improving margins. CACI highlighted specific examples of its earlier investments in agile software and mission tech benefiting from the DoD’s drive to change what and how it acquires and contracts. CACI reaching its earlier three-years targets ~one year early reduces the implied valuation (~13x implied 2026 EBITDA guidance and 15.6x 2026 FCF guidance). Strong FCF (+40% y/y guided to in 2026 ex. one-time tax items) should sustain CACI’s accretive acquisition flywheel… We continue to like CACI’s pivot to growing areas of new defense tech and compelling valuation.”
To this end, Siegmann puts a Buy rating on CACI shares, and his $600 price target indicates room for a 25% one-year upside potential. (To watch Siegmann’s track record, click here)
That view is echoed more broadly. Of 12 recent analyst reviews, 10 are Buys and 2 are Holds, giving CACI a Strong Buy consensus rating. Shares trade at $479.72, with an average target price of $568.50 pointing to a potential 18.5% gain in the coming year. (See CACI stock forecast)
Booz Allen Hamilton (BAH)
The next stock we’ll look at is Booz Allen Hamilton, another NOVA denizen in the government-contractor niche. Booz Allen has been in service contracting for over a century, working across public and private sectors. Today its work spans marquee federal agencies – including the Pentagon – and commercial customers; moreover, it partners with Silicon Valley startups through its corporate venture arm, Booz Allen Ventures. Over time, the company has built recognized expertise in fields spanning AI, cybersecurity, networking, and the modern digital battlespace.
That breadth of experience has evolved into a concentrated focus on digital and AI solutions, areas that Booz Allen sees as the next frontier of innovation. The company has funneled significant resources into research and development over the past decade, particularly in AI, while also offering R&D support to its clients. The scale of this effort is evident: more than 2,350 of Booz Allen’s employees are dedicated to AI, and the company maintains roughly 200 active AI projects with over 160 federal agencies. Its offerings cut across data management, engineering, online security, generative AI, and even emerging fields like quantum computing.
One of the most visible examples of this expertise is the Pentagon’s Advana program, or Advanced Analytics. Booz Allen secured this five-year, $647 million contract in 2021, positioning the firm at the heart of the Defense Department’s AI rollout. Advana is central to the Pentagon’s Chief Digital and Artificial Intelligence Office (CDAO) strategy, designed to simplify data discovery and usage across more than 3,000 systems.
This positioning naturally invites comparisons with Palantir. Both companies deliver AI-powered data solutions to marquee government agencies, yet, Booz Allen still has far more headroom for growth. While Palantir commands a market cap near $372 billion, Booz Allen’s valuation stands at $13.4 billion. That smaller base creates a runway for expansion, especially as new contracts continue to come in.
Recent wins underscore this trajectory. In July, Booz Allen landed a $315 million rapid prototyping contract with the U.S. Air Force, in partnership with L3Harris, to advance the Combined Joint All-Domain Command and Control (CJADC2) initiative. Just weeks later, the company secured a separate five-year Department of Defense contract – this one carrying a ceiling of $1.58 billion – for intelligence analysis focused on countering weapons of mass destruction.
These contracts feed directly into a record-level backlog. At the end of fiscal 1Q26, Booz Allen reported $38 billion in total backlog, alongside quarterly revenue of $2.9 billion. While revenue was flat year-over-year and narrowly missed estimates by $23 million, profitability showed resilience. Non-GAAP EPS of $1.48 was up 7% year-over-year, beating forecasts by three cents, and free cash flow surged to $96 million – nearly five times the figure from two years earlier.
In her coverage of Booz Allen for Bank of America, 5-star analyst Mariana Perez Mora sees the defense sector as the company’s chief avenue for future expansion
“We think Booz Allen Hamilton is uniquely positioned to the ongoing trend towards more agile, commercial, and competitive award strategies given the company’s deep customer intimacy… While we don’t anticipate BAH leaving the Civil realm altogether, the emphasis on Defense & Intelligence, demonstrated with robust book-to-bill and backlog, was clear. In addition, BAH tripled its investment in its venture arm (to $300mn) which we see as a key strategic move to remain at the forefront of new tech and innovation. As the DoD reignites spending on its priorities (Golden Dome, AI/ML, cyber, zero-trust, etc.), we concur with management that BAH is well poised to capture new opportunities and continue to act as the bridge between commercial tech and the US Government,” Perez Mora opined.
These comments back up Perez Mora’s Buy rating on BAH, while her $160 price target suggests that this stock can see a one-year upside of 47%. (To watch Perez Mora’s track record, click here)
The broader Street is somewhat more measured, with a Moderate Buy consensus based on 11 analyst reviews; 5 Buys, 4 Holds, and 2 Sells. With shares currently at $108.72, the average target of $125.10 still implies a 15% gain over the coming year. (See BAH stock forecast)
To find good ideas for AI stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.