Palantir (NASDAQ: PLTR) stock is bounding higher in Thursday’s trading. The tech company’s share price was up 7.9% as of 3:30 p.m. ET amid a 0.5% gain for the S&P 500 and a 0.8% gain for the Nasdaq Composite.

While bullish momentum for the broader market is likely playing a role in sending Palantir’s share price higher, defense industry news is also helping to support gains for the company’s valuation. Even though the stock is seeing a big pop today, its share price is still down roughly 20% year to date.

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Palantir is rising on news of potential U.S. investment in drone tech

According to a report published by The Wall Street Journal yesterday, the U.S. government could be gearing up to provide direct funding to domestic drone companies through investments. The report directly named Unusual Machines, Performance Drone Works, and Neros Technologies as companies that could wind up investment-tied government funding.

While Palantir wasn’t directly named as a likely recipient of investment funding in the report, it’s not a stretch to think that the company could benefit from government support for the drone industry. The company’s software helps support drone applications from multiple providers, and March saw Palantir announce a substantial new partnership with Ondas — a provider of drone tech.

Is Palantir stock poised for a rebound?

Trading at roughly 98 times this year’s expected earnings and 44 times this year’s expected sales, Palantir undeniably has a risky valuation profile. On the other hand, the company has reliably exceeded Wall Street’s sales and earnings forecasts — and it looks poised to benefit from tailwinds in the defense industry over the long term. While the stock’s valuation profile means it won’t be a great fit for every investor, those with high risk tolerance and a long time horizon could still wind up scoring big wins with the stock.

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