Palantir, the US software company known for its work with intelligence agencies and the military, has had a tumultuous journey since going public. CEO Alex Karp has frequently expressed frustration with the stock market’s lack of understanding of his company. Investors were hesitant due to Palantir’s history of losses and its slow progress in transitioning from government contracts to corporate IT. As a result, the company’s shares fell below their initial listing price.
Karp has little patience for stock market critics and has only entertained questions from two bullish analysts during earnings calls. However, thanks to its popularity among individual investors and the AI hype, Palantir’s stock has surged nearly six-fold since last year. This surge in value has pushed its valuation to astronomical levels—trading at around 30 times expected revenue this year and 100 times earnings.
This week marked a significant milestone for Palantir as it joined the S&P 500 index after achieving sustained profitability for the first time in its two-decade history—a requirement for inclusion. This move reflects a broader shift towards incorporating artificial intelligence into mainstream tech companies within the index.
Another notable addition to the S&P 500 is Michael Dell’s Dell Technologies, which returned after being taken private eleven years ago. Dell Technologies’ stock has tripled since last year due to its involvement in AI technologies. However, it is Palantir that presents an intriguing attempt at bringing AI into corporate environments.
The company’s leaders have always aimed to make enterprise software more exciting rather than mundane. Co-founded by Peter Thiel with a focus on aiding intelligence agencies post-9/11, Palantir faced criticism regarding data collection concerns and ties to government entities.
Behind all this drama lies Palantir’s challenging endeavor of providing organizations with timely data access for decision-making purposes through their software platform—an engineering feat that combines various data sources effectively but requires costly customization due to organizational differences.
While achieving profitability suggests progress in refining their business model, Palantir still needs to demonstrate success with a broader customer base as it expands beyond government contracts into other industries.
Additionally, integrating large language models into critical decision-making processes poses another obstacle as these probabilistic systems can occasionally produce incorrect results—leading organizations to approach cautiously rather than fully embracing them.
However, recent news indicates that more companies are recognizing Palantir’s value in navigating generative AI technology—a positive sign for future growth. Revenue growth has accelerated significantly while customer count rose by 41% compared to last year.
Despite warning about upcoming costs associated with an AI revolution, Palantir remains optimistic about maintaining profitability if their shares continue performing well—an outcome that may change Karp’s perception of Wall Street.
