The shine has came off of Palantir in recent months, but the defense tech company's growth prospects are still strong, according to Bank of America. Analyst Mariana Perez Mora initiated coverage of Palantir with a buy rating, saying that investors are undervaluing the demand growth for artificial intelligence. "We see Palantir as a beneficiary of rapidly growing demand for AI-platforms in both commercial and government end-markets. Palantir's dominant position in the AI-powered software market, differentiated end-to-end & highly-secure solutions and first mover advantages should support more than 30% annual revenue expansion and improving profits in the midterm," Perez Mora wrote. Shares of Palantir have been slammed in 2022, falling more than 50%. However, Bank of America argued that the stock is trading too much like a tech stock instead of a defense stock, saying "data is the new bullets." "We think PLTR stock has not benefited from the recent defense re-rating despite significant US National Security exposure. While geopolitical tensions pose a risk to worldwide software penetration, they are an opportunity for Palantir's national security solutions in the US and allied countries, as militaries and intel services will need enhanced data and logistics capabilities as soon as possible," Perez Mora wrote. The upgrade is a bit of a contrarian call by Bank of America, as Palantir is not a well liked stock on Wall Street. The majority of analysts have a sell or hold rating on the stock, according to FactSet. Bank of America initiated the stock with a price target of $13 per share, which is more than 57% above where the stock closed on Friday. Palantir shares rose 4% in the premaket. — CNBC's Michael Bloom contributed to this report.