It is led by an eccentric philosopher, provided Covid vaccines and helped capture Osama Bin Laden and fraudster Bernie Madoff. Stocks have stunned Wall Street since Trump won the election.
Our investment guru Anne Ashworth wonders whether small UK investors should join in Palantir’s 3,000 percent share price increase.
Palantir Technologies used to be a name known only to the defense departments and intelligence communities of Washington and Whitehall.
But now this $147 billion American software group is being talked about as the next tech superstar.
The fast-growing company, based in Pal Alto, California, is talked about in the same breath as $3.5 trillion chip designer Nvidia, the tech wonder stock of the year so far.
Nvidia is a leader in semiconductors. Palantir specializes in the advanced analysis of multi-source data – which is crucial in modern warfare, but also has broader applications.
The US government is its largest customer. Its technology was used to deliver Covid vaccines, convict fraudster Madoff and dispatch Al Qaeda kingpin Bin Laden. In Britain, it is best known for the controversial adoption of its data platform within the NHS, with the aim of improving efficiency.
Palantir – which prefers not to be talked about given the confidential nature of its contracts with the US and UK governments – has been thrust into the spotlight for its 274% jump in its share price this year.
Stocks soared after Donald Trump’s election to the White House, based on investors’ view that the country will be a major beneficiary of increased national security spending coupled with curbs on immigration.
Shares are now almost 3,000% above their levels from a decade ago.
To some, the company’s valuation seems dangerously high. But others believe Palantir could go even further as it is seen as a top Trump trade.
Founded in 2003, the company is named after the palantiri – the magical ‘seeing stones’ from JR Tolkein’s Lord of the Rings.
That’s an appropriate name, because the company is a 21st century magician in the dark art of collecting and analyzing big data.
In the weeks after the US election, shares have risen 54 percent to $63 on hopes of how the technology could be used in the future, in everything from counter-terrorism to healthcare.
In its early days, Palantir’s goal was “to reduce terrorism while preserving civil liberties.”
Now Palantir has ambitions beyond this planet. It is a partnership to supply the commercial space station Starlab in low Earth orbit, a joint venture between the American company Voyager and Airbus.
Back on this planet, Palantir reserves its expertise exclusively for Western countries, a commitment crucial to its “Trump trade” status.
It has taken on even more luster because prominent Trump allies are among its executives.
Billionaire entrepreneur Peter Thiel is one of Palantir’s founders and its second-largest shareholder. Thiel financed the entry into politics of newly elected Vice President JD Vance, for whom he has acted as a mentor.
Thiel, it is claimed, convinced Trump to choose Vance as his running mate.
Thiel’s private life is a staple of Hollywood tabloids.
There is much speculation about the father of two’s relationships outside of his marriage with his financier husband Matt Danzeisen.
His views on other topics also raise eyebrows: for example, he has advocated the creation of the Enhanced Games, in which competitors use all possible performance-enhancing drugs.
These terms attract extra publicity because 57-year-old Thiel belongs to the ‘Paypal mafia’, the powerful gang that founded the payment platform in 1998.
Other members of this select fraternity include fellow billionaire Elon Musk, who is taking on a central role in the Trump administration as efficiency czar, assuming a near vice-presidential degree of power.
Have Thiel and Musk always gotten along well? No. But was the alliance of these conservative libertarians the key to winning the support of tech bosses and Silicon Valley billionaires for the Republicans? Yes.
Trump is trying to cut government spending on almost everything except defense – which is Palantir’s core competency.
The Gotham division focuses on defense and intelligence departments, while the Palantir division focuses on the private sector, where clients include Ferrari, Fiat Chrysler, Merck and Morgan Stanley.
There is controversy in Britain over Palantir’s relationships with the Ministry of Defense and the NHS. The concern is the amount of personal information about Britons that Palantir could obtain from its £330 million NHS data systems contract. This week it emerged that Labor colleague Tom Watson had joined the British branch of Palantir as an advisor. Watson, a former deputy leader, was a vocal privacy crusader.
But virtually every aspect of the group is controversial, from its founders and bosses to the nature of its operations, which are at the heart of the industrial revolution brought about by ChatGPT and other generative AI software models.
The speed at which AI was adopted by the US government drove a 30% increase in third-quarter revenue at the company.
Brokers like T Rowe Price say Palantir is particularly adept at integrating data and generative AI to get the very best results.
Palantir now expects revenues for all of 2024 to be between $2.8 billion and $2.9 billion – an outcome that would certainly appeal to major investors on Wall Street and in the City, including fund manager Vanguard.
Revealing third-quarter earnings, Palantir CEO Alex Karp said, “We absolutely blew this quarter off the charts, driven by relentless demand for AI that won’t slow down.”
Karp, who founded Palantir with fellow Stanford Law School student Thiel, is considered almost as eccentric as the latter.
This may be partly due to a very revealing interview in the New York Times in which Karp described himself as “a Jewish, racially ambiguous dyslexic.”
The 57-year-old never learned to drive, doesn’t like owning things and surrounds himself with bodyguards. His middle name is Caedmon, after a 7th century Anglo-Saxon cowherd and poet who looked after the cattle at Whitby Abbey and learned to compose verse in a dream.
He sees himself as a philosopher rather than a technician, and is also a Democrat.
Nevertheless, Karp takes a robust stance on national security and follows the motto: “You scare the hell out of your opponents.”
“Without being Pollyannaish or idiotic or pretending that any country has been perfect or that there are no injustices, on the margins, would you want a world where America is stronger, healthy, and more powerful, or not?” is one of his rhetorical questions.
Karp takes a similarly robust stance on the investors who were short sellers of Palantir stock earlier this year, betting their price will fall.
He simply noted that he likes to “burn” those who fall short of his supply.
“Almost nothing makes a person happier than taking away the cocaine lines from these short sellers, who are shorting a really big American company – not just ours – they just love to take down big American companies so they can get their coke can pay. .’
“And the best thing that can happen to them is that we will lead their coke dealers to their homes after they can’t pay their bills.”
Whether or not they’re being targeted by angry drug dealers looking to get paid, anyone who came up short on Palantir earlier this year almost certainly lost money.
But some analysts warn that anyone who jumps on board now could be in for a perilous journey, arguing that shares have risen too quickly.
Brent Thill of broker Jefferies questions whether the growth estimates of 26% this year and 24% in 2025 are feasible.
This doubt appears to be behind the decision of hedge funds, such as Ken Griffin’s Citadel, to sell their stake in Palantir this year.
A few funds transferred the money to Nvidia instead. Most UK fund managers have not yet acquired shares in the company, perhaps because it only joined the S&P 500 index in September.
This caution about Palantir’s prospects is reflected in analyst opinions: eight of the companies, including Goldman Sachs, that track the stock rate the stock as a hold.
Three companies rate the shares as ‘buy’, perhaps believing that the company’s move into the tech-heavy Nasdaq index on November 26 will provide a boost. Exchange Traded Funds (ETFs) that track this index will be forced to buy the shares.
Ahead of this move, broker Wedbush’s Dan Ives raised the price target on the stock to $75. Bank of America’s Mariana Perez has set the same goal, arguing that “Palantir is poised to dominate as companies turn to software and AI to boost their margins, rather than trying to achieve scale by investing in fixed assets.’
U.S. retail investors seem to believe that Palantir will deliver the “tendies” – online jargon for stock price gains.
UK investors may already be exposed to the AI revolution through stocks like Nvidia and Microsoft. Palantir could be an addition, provided you can afford to watch and wait.
How to buy
You can buy and sell shares through online investment platforms such as AJ Bell, Bestinvest, Hargreaves Lansdown and Interactive Investor.
If you want to bet on a rise in defense spending, Palantir is the largest holding on the Han Future of Defense ETF. This fund puts money into companies that generate revenue from defense and cyber defense spending by NATO and NATO+ allies. The fund also has an interest in BAE Systems, the British group.
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