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Peter Thiel's company Palantir just won a major Pentagon contract, beating out traditional military vendors

Key Points
  • The Army awarded Peter Thiel-backed data intelligence company Palantir a contract worth up to $800 million.
  • This is one of Palantir's biggest contracts ever, and its first on a "defense program of record," a designation for the most substantial government contracts.
  • The company has been rumored to be considering an IPO this year. It was most recently valued at $20 billion.
Alexander Karp, CEO of Palantir Technologies Inc.
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Palantir Technologies, a Silicon Valley data analytics company founded by Trump adviser Peter Thiel and with roots in the CIA-backed In-Q-Tel venture capital organization, has won a major Army contract worth up to $800 million, CNBC has confirmed.

It's the first time the venture-backed company has been named a "defense program of record." Programs of record are essentially the biggest, multi-year projects awarded by the Pentagon.

The contract would require Palantir to build an intelligence system to aid soldiers in remote environments, called an Army Distributed Common Ground System, known as a DCGS-A. It was previously reported by the Washington Post.

Palantir, which has been rumored to be close to an initial public offering, beat out Raytheon, a more traditional defense contractor without Palantir's Silicon Valley roots, a departure for the Army in terms of its biggest contracts.

"While we are disappointed in the Army's decision on this initial delivery order, it represents a relatively small number of systems. We will actively compete for future delivery orders as we continue to work closely with the Army to help them meet their intelligence needs," said Maureen Stevens, a Raytheon spokeswoman, via email. Stevens said Raytheon was awarded a DCGS-A 10-year contract last March, part of a "multiple delivery" plan by the Army. The Pentagon did not immediately respond to request for comment.

The deal would dwarf Palantir's most recent government contracts, including a $222 million award in 2016 from the Department of Defense's Special Operations Command (SOCOM). That sole-source award was for a technology and logistics software and support project called "All-Source Information Fusion," meant to bring together intelligence and other information gathered by SOCOM, which oversees the special operations units of all branches of the U.S. military.

Palantir's customers have included top-tier banks, government agencies, health-care firms and manufacturers in the automotive and aerospace industries. The company provides tools for visualizing and making use of huge swaths of data, using proprietary software. Financial industry analysts have been monitoring Palantir as an IPO candidate for 2019.

Thiel co-founded Palantir in 2003, and was the company's largest shareholder at its last round of funding in 2015, which valued it at $20 billion. The iconoclastic tech investor is worth $2.5 billion according to Forbes, and earned his fortune as an early leader of PayPal and investor in Facebook, where he sits on the board of directors. He was a prominent supporter of Trump during the 2016 presidential campaign, and has advised the administration informally on technology and science since then.

Watch CNBC's full interview with Palantir CEO Alex Karp