The U.S. government is preparing to spend more on national security than at any point in modern history. The Trump administration’s proposed FY2027 budget calls for roughly $1.5 trillion in total defense-related spending — an increase of approximately $400 billion above FY2026 levels. That kind of money does not flow evenly across the sector. The winners are companies building technology governments actually want right now: AI-driven intelligence platforms and next-generation space infrastructure.
Two names have emerged as the most compelling stories in this environment: Palantir Technologies (NASDAQ: PLTR) and Rocket Lab USA (NASDAQ: RKLB). Both are growing fast. Both carry premium valuations. And they represent very different risk profiles.
Palantir: The AI Platform Governments Can’t Easily Replace
Palantir has spent two decades building data integration and AI decision-making software for intelligence agencies and military operations. That investment is now paying off in a measurable way.
First-quarter 2026 revenue came in at $1.63B, with an operating margin of 46% — a level of profitability that most software companies spend years chasing. U.S. government revenue grew 84% year over year in the quarter, accelerating from 66% growth the prior quarter. U.S. commercial revenue climbed 133% to $595 million. For the full year, management is guiding to roughly $7.65–$7.66 billion in revenue, which would represent approximately 71% growth over 2025.
The product driving that growth is the Artificial Intelligence Platform, or AIP, which lets organizations run large language models on their own data without exposing it to outside systems. For defense and intelligence clients, there is no easy substitute for that capability.
Palantir trades at $151.14 per share with a market cap of $347.0B and a trailing P/E of 169.8x. That is not a value stock. Wedbush’s Dan Ives has a $230 target and calls it a core AI holding. RBC Capital sits at the other extreme with a $90 Underperform rating. The average analyst target across tracked ratings is $183.88. The core debate is straightforward: the business is exceptional, but the stock is pricing in years of perfect execution.
Rocket Lab: Hardware for the New Space Race
Where Palantir sells software, Rocket Lab builds the physical infrastructure that modern defense and commercial space programs depend on — launch vehicles, spacecraft components, and satellite systems.
The company posted record first-quarter 2026 revenue of $200.3M, up 63.5% year over year, with a gross margin of 38%. The business is still operating at a net loss of $45.0M for the quarter, though that figure improved meaningfully from $60.6 million a year earlier. Management guided for $225–$240 million in Q2 2026 revenue.
The more important number may be the backlog: $2.2 billion in contracted revenue, more than double the level from a year earlier. That forward visibility is rare for a company at this stage.
The strategic catalyst investors are watching is the Golden Dome for America initiative. CEO Peter Beck confirmed Rocket Lab was selected to support the Department of War’s Space Based Interceptor program in partnership with Raytheon. The company also has Neutron — its medium-lift rocket targeting a launch in late 2026 — which would meaningfully expand its addressable market if successful.
Shares currently trade at $125.36, with a market cap of $72.6B and a 52-week range of $25.24 to $151.00. Nine of ten tracked analysts rate the stock a Buy or better, with a high price target of $120 from firms including Deutsche Bank and TD Cowen — meaning the stock has already run past most targets following its sharp year-to-date gain.
Which Fits Your Portfolio?
These are not competing businesses. They are two ways to play the same macro trend.
Palantir is the more mature, more profitable option. Its government relationships and AI infrastructure are genuinely difficult to replicate. The risk is entirely in the valuation — at roughly 170 times trailing earnings, there is little room for disappointment.
Rocket Lab is earlier-stage, still unprofitable, but building toward a larger business. The backlog and contract pipeline suggest real demand. Neutron is the wildcard that could accelerate the story significantly — or test investor patience if it faces delays.
Both require conviction that defense and space technology spending remains a durable, multi-year theme. The budget numbers suggest that thesis is well-supported. The question for investors is simply how much premium they are willing to pay to own a piece of it.
Bonus Pick: June 11. 1,500 investors. One stock changes forever.
On June 11 — one day before the IPO — SpaceX is hosting 1,500 retail investors for an unprecedented Investor Day.
They’ll walk through the full S-1.
Starlink. Colossus. The $18.7 billion revenue machine.
And buried in the infrastructure section: the name of the one supplier Musk cannot replace.
A small, publicly traded company that builds the power equipment keeping a million GPUs alive.
1,500 people will hear that name for the first time on June 11.
By June 12, millions more will.
You can hear it right now.
Dylan Jovine is giving it away — free.
