Palantir Technologies saw a 5% rise in shares on Tuesday due to increased demand for its AI services, leading to a higher revenue forecast. Sales to the U.S. government jumped 53% to $426 million, with a total second-quarter revenue of about $1 billion. The company expects expenses to rise in the third quarter.

Investors have been bullish on Palantir’s military-grade AI tools, driving shares to double in value this year. The U.S. Army may spend up to $10 billion on Palantir’s services over the next decade. Analysts caution about the disconnect between valuation and achievable growth, despite the stock trading at over 200 times its 12-month forward earnings estimates.

Palantir raised its annual revenue forecast for the second time this year, surpassing Wall Street estimates. The company, co-founded by Peter Thiel, is facing rising competition for top talent as businesses rapidly adopt AI. At least six brokerages raised their price targets on the stock following the positive results, with Jefferies analysts expressing concerns about valuation versus growth potential.

Read more at Yahoo Finance: Palantir shares jump as soaring AI demand powers forecast upgrade