Why BigBear.ai Stock Is Skyrocketing Today

BigBear.ai (NYSE: BBAI) stock is surging in Thursday's trading. The company's share price was up 19.3% as of 3:45 p.m. ET. Meanwhile, the S&P 500 index was flat, and the Nasdaq Composite index was up 0.1%.

After a surge of bearish pressures due to macroeconomic concerns last week, BigBear.ai and other meme stocks have been making a rebound this week. The software specialist's valuation is likely also getting a boost from recent news about Palantir's plans in the defense industry.

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BigBear.ai stock surges on meme momentum

Investors sold out of meme stocks last week after the Federal Reserve served up some bearish news. While the central banking authority announced another 25 basis-point cut for interest rates at its most recent policy meeting, its leadership indicated that there will now likely only be two rate cuts on that level next year. Previously, the Fed had indicated that there could be four rate cuts in 2025.

But while the news initially caused investors to pivot away from speculative growth stocks, this trend has subsequently been reversing. BigBear.ai and other stocks that have been benefiting from meme-stock momentum are seeing strong gains today.

Additionally, investors may be betting that the company is poised to benefit from Palantir's unfolding strategy in the defense space. Last week, the Financial Times reported that Palantir is teaming up with Anduril to form a consortium of companies with the aim of disrupting the defense industry.

What comes next for BigBear.ai?

Artificial intelligence (AI) stocks have been red hot lately, and it's possible that bullish momentum in the category will continue to lift BigBear.ai's valuation. Additionally, the company could continue to see strong bullish momentum if it scores new contract wins or emerges as a potential partner in Palantir and Anduril's defense-industry alliance,

But investors should also keep BigBear.ai's risk profile in mind before going all in on the stock. While the company has scored some contract wins lately, the material significance of these deals is unclear. The software specialist's share price has also seen big gains on meme-stock-related momentum that appear to be unconnected to underlying business fundamentals. So while the stock could continue to rally, it also looks like a risky play right now.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.