Palantir shares jumped over 12% Tuesday after the data analytics firm raised its annual revenue forecast for the third time, bolstering investor confidence that the artificial intelligence boom was fueling demand for its services.

The company is among the biggest stock market winners of the generative AI boom, with its shares more than doubling in value this year -- a rally that has sparked concerns over its steep valuation.

But Palantir's results late on Monday allayed some of those fears as demand rose thanks to its AI platform, which is used to test, debug code and evaluate AI-related scenarios, as well as its government-oriented services that include software to visualize army positions.

Palantir raised its revenue forecast to between $2.805 billion and $2.809 billion for 2024, from its previous projected range of $2.742 billion to $2.750 billion.

For the third quarter, the company saw its revenue from U.S. government contracts surge 40%, which made up more than 44% of its total sales of $725.5 million.

"We see a long runway of growth in the government sector, owing to the massive demand for AI-first solutions across governmental functions such as the military and healthcare," Morningstar analysts said.

But the analysts cautioned that the stock's recent surge in value means that "any bump in the road, such as sales execution challenges or weaker-than-expected top-line growth or guidance, could materially affect the stock's valuation."

If premarket gains hold through the day, Palantir is expected to add $12 billion to its market value.

It trades at a forward price-to-earnings ratio of 95.43, compared with 25.60 for peers Oracle and 126.92 for Snowflake.

Palantir stock has outperformed the S&P 500 index this year. It was added to the benchmark index late-September.