Palantir Technologies (NASDAQ: PLTR) shares rose more than 2% intraday after William Blair upgraded the stock to Outperform from Market Perform, citing continued momentum across government and commercial operations following a recent selloff.

The firm said it upgraded Palantir ahead of earnings after a roughly 30% decline in the share price, noting that its proprietary government and commercial tracking data showed sustained momentum. According to William Blair, the current U.S. administration continues to increase engagement with Palantir, while enterprise customers are expanding workflows.

The analyst highlighted Palantir's strong recent performance, including what it described as an exceptional “Rule of 114” September quarter and expectations for a very strong December quarter. While acknowledging that the valuation remains elevated, the firm said it now appears more reasonable relative to recent venture capital rounds within the AI ecosystem.

William Blair noted that Palantir has not been immune to the broader software sector selloff but expects a positive earnings reaction based on its data and industry discussions. Even if shares were to decline following earnings, the firm said it expects the stock to recover to above $200 over the next 12 months as growth and margin expansion continue.

The firm added that prior concerns related to government diversification away from sole-source analytics providers have eased under the new administration, making the recent pullback an attractive buying opportunity for a company viewed as a key player in the AI supply chain.