(PLTR), (AMZN)
It’s time to dive deep into the world of AI, specifically Palantir Technologies (PLTR). A once shadowy figure in the realm of data mining and artificial intelligence, Palantir emerged from the shadows after its 2020 IPO.
The company, which had been cutting its teeth on intelligence agency contracts, suddenly found itself in the investor spotlight.
However, it wasn’t all smooth sailing. The stock, once a darling of the market, faced a rough patch in 2021 and 2022, plummeting by a staggering 84%.
But let's fast-forward to 2023.
Palantir is making a comeback, thanks to the surging interest in generative AI. The company's market cap stands at $42 billion, and while it might seem like a leap to imagine it hitting the $1 trillion mark, it's never too early to speculate on long-term performance.
Let’s revisit the company’s roots for a moment.
Founded in 2003, in the wake of the 9/11 attacks, Palantir's raison d'être was to create algorithms that could comb through vast amounts of data to detect potential security threats.
They crafted algorithms that were nothing short of digital sleuths. These clever bits of code were unleashed into the labyrinth of U.S. intelligence, defense, and law enforcement databases.
Their mission? To ferret out the subtle, seemingly harmless details – think a lone plane ticket, a string of rented properties, frequent calls to the Middle East, or hefty withdrawals from an overseas bank.
Isolated, these bits are innocuous. But stitch them together, and you've got the makings of a potential terrorist plot. It’s like finding a needle in a haystack, except Palantir built a magnet.
Now, in the present day, Palantir’s algorithms have evolved. They’re being retooled for the commercial world, helping businesses forecast customer behavior, optimize resource management, and enhance data-driven decision-making.
The arrival of generative AI platforms, like ChatGPT, has transformed the AI landscape. These systems, capable of summarizing data, generating original content, and boosting business productivity, have opened new doors.
Palantir, with its rich history in AI, was quick to adapt, developing tools to meet these burgeoning business needs.
Considering the AI market potential, which ranges from a jaw-dropping $14 trillion by 2030 to more conservative, yet still impressive, estimates of $6 to $7 trillion, Palantir is positioned to make significant strides. Its expertise could be the key to unlocking a share of this lucrative market.
Palantir’s recent performance has been solid, with a 17% year-over-year revenue growth in the third quarter, amounting to $558 million. Its commercial revenue outpaced government sales, and the company recorded its fourth consecutive quarter of GAAP profits.
With a projected full-year revenue of $2.2 billion and a total addressable market now estimated at a whopping $800 billion (thanks to generative AI), Palantir's future looks promising.
Capturing just 7% of this market annually could skyrocket Palantir's revenue to $56 billion over the next decade. This growth, coupled with an operating margin of 25%, could translate into approximately $14 billion in operating profits.
As enticing as these numbers are, achieving a trillion-dollar valuation isn’t a walk in the park.
Palantir’s journey to this milestone will require sustained innovation, market adaptation, and perhaps a bit of luck. The company's two-decade expertise gives it a significant advantage over its neophyte rivals, but the path is fraught with challenges.
Management’s recent shareholder letter expressed an unprecedented demand for their AI platform, a testament to the company's growing influence in this domain.
The convergence of opportunity and expertise could very well propel Palantir to that elusive trillion-dollar valuation over the next decade.
So, what does the future hold for Palantir?
Palantir Technologies, riding the AI wave, is positioned similarly to how Amazon Web Services revolutionized computing. With AI and big data becoming increasingly pivotal, Palantir stands to benefit significantly from these trends.
Will Palantir join the ranks of the trillion-dollar giants?
While the road is long and uncertain, the potential is undeniably there. For forward-looking investors, Palantir isn’t just a company to watch; it’s a gateway to the ever-evolving and exciting world of AI and big data.
Buying the dip could be a strategic move for those willing to invest in a future shaped by AI innovations.
