Welcome back to DailyPalantir! Yesterday, Palantir briefly touched $26 and is up about 7% for the week. Let’s discuss why:
Macroeconomic
So, let’s start off with the macro. Firstly, the decrease in inflation has played a significant role. Lower inflation often leads to a decrease in interest rates, which benefits companies like Palantir by reducing the cost of capital. Although Palantir has managed well even with high interest rates due to its strong financial position, a lower interest rate environment makes it easier for companies to sell into different markets, as the cost of borrowing is reduced. This positive economic outlook boosts investor confidence, leading to a higher stock valuation.
CPI came in at 3.2%. PPI came in lower than expected. The more inflation comes to the downside, the more potential for a rate cut.
Now another thing happening external to Palantir but something that still effects Palantir is the performance of Nvidia.
Nvidia is now the most valuable company on the planet.
So, how does this affect Palantir? If NVDA has a ton of demand, it’s because models are being trained at scale. We know why AIP matters — it allows organizations to harness the power of LLMs securely. Palantir sells the AI infrastructure necessary for these models to have any use within the enterprises. If models need to be trained, and we can see that demand is just getting started, then those models ALSO will need to be implemented within organizations. In comes…AIP. NVDA’s guidance and results shows that the value of LLMs have just begun — Palantir needs organizations to see how LLMs can transform their business in order to sell them on the value of AIP.
As Nvidia's stock soars, it elevates the perceived value of other AI-related companies. Investors looking to increase their exposure to AI might turn to Palantir, seeing it as a promising investment due to its integration of AI in its software solutions. This trend underscores the interconnectedness of companies within the AI ecosystem and how the success of one can lift others.
Qualitative
While there are plenty of macroeconomic reasons for the surge in Palantir’s stock, let’s discuss some qualitative reasons for why the market may be getting excited.
Snowflake
Despite both being big names in enterprise software, Snowflake has hit some bumps lately, including a data breach, slower growth, and their CEO leaving. The data breach was due to Snowflake not having 2 factor authentication for some of their clients which really begs the question of how that even happened. These issues have dragged Snowflake's stock down, prompting investors to rethink their choices. On the flip side, Palantir has kept up steady growth and landed major contracts, making it a more attractive option for investors.
Remember, when Palantir bottomed at $6 in Dec 2022, Snowflake was $150. Palantir is up 4x from then, Snowflake is now $127. Wall Street doesn’t like to be wrong for a long time, and if they think they got this wrong, they will cut their losses and divert funds to companies like Palantir.
Their different strategies and products further highlight this split. Snowflake has focused on its data warehouse solutions, trying to position itself as the top AI enterprise by building its own models. However, Palantir’s approach with Foundry and AIP platforms, which help businesses turn data into actionable insights, has been more effective. Investors see Palantir's solutions as more comprehensive and impactful, which has driven more investment towards Palantir compared to Snowflake.
Now, what’s really confusing here is Snowflake’s focus on building their Arctic LLM.
Palantir has focused on innovation and improving its products to meet market needs. In contrast, Snowflake’s decision to develop its own models, despite better alternatives being available, has puzzled the market and raised doubts about its strategy. This clarity and effectiveness in Palantir’s approach make it a more attractive investment. As a result, investors are moving their funds from Snowflake to Palantir, seeking better growth prospects and stability.
This divergence is also evident in their respective market strategies and product offerings. Snowflake has focused on its data warehouse solutions, branding itself as the "AI Enterprise" with attempts to build its own models. However, Palantir's approach of integrating AI through its Foundry and AIP platforms has proven more effective. Palantir's technology enables clients to create an ontology of their data, driving actionable business insights and outcomes. This distinction has likely resonated with the market to an extent, even if not fully, leading investors to favor Palantir over Snowflake, as Palantir’s solutions appear more comprehensive and impactful in the AI landscape.
Argus Research + AIP being digested by the market
Another potential reason the stock is doing well is because Argus initiated coverage of Palantir with a "buy" rating and set a price target of $29, citing the company’s strong AI capabilities and growing demand in both government and commercial sectors. This bullish outlook from a respected research firm has boosted investor confidence and added momentum to Palantir’s stock. The market perceives this endorsement as a validation of Palantir’s strategic direction and potential for sustained growth.
Argus Research emphasized Palantir’s profitability and solid balance sheet as key factors in their positive assessment. With consistent GAAP profitability and a substantial cash reserve, Palantir is well-positioned to capitalize on emerging opportunities in the AI space. Argus also highlighted Palantir’s role in the defense sector, where its technology is expected to play a crucial role. This alignment with high-priority government contracts further strengthens Palantir’s market position and adds to its appeal for investors.
In addition to Argus Research, Palantir’s partnership with Tampa General Hospital has also showcased the company’s value and impact. At the AIP Conference, the CEO of Tampa General highlighted why they extended their partnership with Palantir for another seven years, worth $50 million. He praised Palantir’s technology and its transformative effect on the hospital’s operations, noting how it accelerates processes and improves decision-making. This strong endorsement from a major client underscores the real-world effectiveness of Palantir’s solutions.
The CEO of Tampa General Hospital specifically mentioned the outstanding quality of Palantir’s people and technology. He noted that Palantir’s team is smart, quick to act, and culturally aligned with the hospital’s needs. This partnership has not only improved operational efficiency but also fundamentally changed how the hospital approaches data and decision-making. Such testimonials from high-profile clients add significant credibility to Palantir’s offerings and enhance its market reputation.
Overall, endorsements from Argus Research and partnerships like the one with Tampa General Hospital illustrate Palantir’s growing influence and effectiveness in the enterprise software market. These endorsements highlight the company’s strategic advantages, financial stability, and innovative technology, all of which contribute to the bullish sentiment around Palantir’s stock. As a result, these factors help drive investor confidence and support the upward trajectory of Palantir’s share price.
It feels like the market was able to better absorb what they saw at AIPCon a few weeks later because of some of the issues going on in other SaaS companies, Nvidia continuing to run, and the macro getting better with inflation coming down.
Now, could Palantir fall from here? Yes, its trading at 25 times price to sales so if growth does not improve in Q2, we could see a pullback. But, momentum could also carry the stock higher into that $30 range on any piece of good news, Nvidia continuing to do well, or stronger inflation data.
I think a pullback or a move higher are both possible until this $25 range establishes itself as support and is tested.
I talked more about my thoughts here on Palantir’s price action if you want the video version here. Overall, encouraging price action and now we’ll see how the market continues to react with various events and data coming forward that can affect Palantir.
That’s it for today - see you tomorrow!
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Superbly written and eloquent as well. Few, if any, champions of a corporation have done so well. The retail investors in this great company called Palantir are as invested in its core values as much as we are in hope of a great profit somewhere down the road. “Deferred gratification is the hallmark of the middle class,” I learned a long time ago. And so we retail investors are proud to be patient for as long as it takes for Palantir to realize its truly great promise.
Love you brother! 🥳🥳✌️✌️✌️