Palantir (PLTR) stock rose 4.6% on Monday after NATO announced it had finalized the acquisition of an AI military system from the Denver-based defense tech firm.

Details of the deal were not disclosed, but NATO said it would begin using Palantir’s technology — the Maven Smart System NATO (MSS NATO) — in the next 30 days. MSS uses AI to compile and analyze data for "battlespace awareness and planning," including the identification of military targets.

Palantir stock had gained as much as 9% before forfeiting some of these gains in morning trade alongside a broader market decline.

A version of MSS is already in use by the US military — specifically, the Army, Air Force, and Space Force — and Palantir won a $100 million contract with the US military to extend its access to the software in September.

The company has seen an upswing in American government spending on its AI war tech, recording $1.57 billion in revenue from US government contracts in 2024.

Palantir’s role in AI-enabled warfare has come under some criticism, and the tech firm was dumped by a large-scale Nordic investor last fall over human rights concerns related to its work with the Israeli Defense Force.

Palantir stock has also been on a roller-coaster ride in 2025, rising nearly 50% to start the year before plummeting in late February on reports that the Trump administration is moving to slice the US defense budget.

Aggressive insider sales of the stock also put shares under pressure. Still, Palantir stock is up 22% from the start of 2025 with the S&P 500 down over 8%.

Louie DiPalma, an analyst with William Blair, wrote in a client note on Monday that Palantir’s NATO contract should dispel investor fears that rising geopolitical tensions will hurt US defense contractors.

"This agreement has broader geopolitical significance than just another win for Palantir in the context of investor concerns that Europe is looking to decrease reliance on U.S. defense contractors," DiPalma wrote in a client note on Monday.

“In our view, this award has favorable read-throughs across the U.S. defense sector; Europe will likely remain large buyers of U.S. systems with increasing defense budgets.”

Wedbush’s Dan Ives wrote in his own note to investors Monday morning that the deal "represents an additional tailwind for PLTR," adding the company, in his view, remains "in the sweet spot to benefit from a tidal wave of federal spending on AI across North America and Europe.”

Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.