Palantir soars 13% toward record highs as the stock is set to be added to the S&P 500

• Palantir stock surged 13% after it was announced that the stock will be added to the S&P 500 index on September 23.
• The defense-focused software company, valued at $75 billion, will replace American Airlines Group.
• Palantir's recent focus on AI and consistent profits have convinced Wall Street of its growth potential.

Palantir stock soared as much as 13% on Monday after it was announced that the company will soon be added to the S&P 500 index.

With a market valuation of about $75 billion, the software company that counts the US government as its largest customer is replacing American Airlines Group, which has seen its market valuation tumble 22% to just $7 billion over the past year.

The changes to the index are set to go into effect on September 23.

Palantir stock traded at a new 52-week high, hitting an intra-day peak of $34.13 on Moday.

That's the highest level Palantir stock has traded at since February 2021, which ultimately marked the peak for high-growth tech stocks before a painful bear market unfolded in 2022.

Palantir's addition to the S&P 500 marks an important milestone for the company as it tries to convince investors of its growth story since going public in September 2020. Importantly, Palantir has finally flipped on its profit switch.

Since its IPO, the company has tripled its trailing 12-month revenue to $2.48 billion, increased its quarterly free cash flow from -$308 million to almost $700 million, and notched four consecutive quarters of positive net income, according to data from YCharts.

That last stat is the most important, as consistent profits are a requirement for inclusion into the S&P 500 index.

Palantir has convinced Wall Street that its growth can continue as it focuses more on its AI capabilities. Bank of America reiterated the stock as a "Buy" in a note last month.

"As it was with the gold rush, the real benefactors were the entrepreneurs that supported the rush. This is where we continue to see PLTR's ultimate benefactor - the entrepreneur - the digital axe supplier that is still standing tall now that the AI tourists have started to depart," Bank of America said.

The bank added: "PLTR is well-positioned as enriched data, connectivity, and interoperability are what define the new era of defense."

Palantir stock is less than 3% away from closing at a new weekly and monthly high.