Palantir Issues New Shares
+ responds to AI concerns
Welcome back to DailyPalantir! Today we’ll discuss share dilution, stock action today and Palantir’s response to concerns around implementing AI.
Dilution
Okay, so Palantir officially allowed 110M shares to hit the market from a 2020 compensation plan they had. Their 10K came out and I’ll be going through it throughout the week to find different pieces of information, but below is the dilution:
Now, most of this is to fund stock based compensation. The use of SBC has raised concerns among many investors about dilution. Dilution occurs when a company issues new shares, which can reduce the value of existing shares by increasing the total number available. Palantir has issued a substantial number of shares since going public, which has led to worries about the potential impact on the stock's value and why management keeps doing this.
A few thoughts:
- this wasn’t a surprise and is part of a plan set in 2020. investors can’t really be surprised at this.
- we need to issue stock not to raise capital but to pay for stock based compensation.
- SBC is 22% of revenues, it used to be 70%, so it’s come down significantly.
- SBC is worthless!!!!!!! if the stock doesn’t go up, so this is not some reckless spending using shareholder capital, this is more so “hey we need the best talent in the world, they need stock to be motivated, they won’t stay unless the stock goes up, so we are all aligned on getting the company to perform.”
- in order for the company to perform, aka grow massively, you need the best talent — growth solves all. if AIP demand is “off the charts,” in the words of Karp, then the SBC will be going to talent to capitalize on that demand & hopefully get closer to the 30% CAGR we all know Palantir can get to - in summary: we need the best talent, they need stock, they won’t stay if company stock doesn’t go up, so even with dilution, the idea is to grow fast enough so that dilution doesn’t become a concern long term and to do that you need the best talent to grow.
seriously, Palantir hires the best and smartest people in the world, the SBC is not going to salesman sitting in a cubicle going through linkedin leads to try to sell software, it’s going to engineers leading bootcamps showing off some of the most sophisticated software on planet earth.
Stock-based compensation aligns employees' interests with those of the company and its shareholders. When employees hold stock options, they have a vested interest in the company's success, as any increase in stock value could lead to personal financial gain. This creates an environment where employees are motivated to work towards the long-term success and growth of the company.
At the end of the day, we need the best talent. Karp has already said that they are getting bombarded with applications to join the company and they have massive demand for AIP — if that’s the case, then this really isn’t a big deal. We need the best talent in the world, and if that talent helps us capitalize on the market opportunity that exists right now, in this moment, then the growth should outpace the dilution long term.
Stock Action
So, the stock took a hit today, falling about 6%.
Now, Palantir wasn’t alone here — the broader market took a hit. No huge macro data came out to cause this, but in my opinion, I think the market is very scared about what is going to happen with Nvidia Earnings.
Now, why does NVDA matter when it comes to PLTR?
The short version is even if it doesn’t, many fund mangers have bought PLTR because they wanted AI exposure — if the main company leading the AI revolution is not showing huge demand (I think the earnings will be good, not sure what the stock will do) then the market will interpret that as a reason sell different AI names.
Now, they also are related because NVIDIA's success often reflects a growing demand for AI and machine learning capabilities, which in turn suggests a broader market acceptance and implementation of these technologies across various industries. As NVIDIA's GPUs are essential for training complex AI models, an increase in their usage indicates that more companies are investing in AI solutions.
For Palantir, this trend is beneficial because its platforms, such as Foundry and Gotham, are designed to leverage AI advancements to analyze large datasets and support decision-making processes. As more organizations look to integrate AI into their operations, the demand for sophisticated data analytics platforms like those offered by Palantir is likely to increase. Palantir's platforms can be used in conjunction with NVIDIA's hardware to provide end-to-end solutions that encompass both the computational power required for AI and the analytical capabilities needed to extract actionable insights from the resulting data. More GPU demand, more AI software demand for companies like Palantir.
What makes a market is the difference of opinions — Loop Capital put out a report estimating Nvidia’s FY 2026 revenues to come in at… $175B.
That is 60% above consensus on the street… Either these estimates, fueled by the increase in data center revenue, are going to be right and the street is NOT BULLISH ENOUGH, or semis are actually cyclical and $NVDA will not be anywhere near $175B in top line by 2026.
Tomorrow will be a VERY important day for Palantir — Nvidia will determine how AI demand is scaling and if investors still have an appetite for AI based companies. I’ll be covering it tomorrow and then sending the newsletter shortly after the results and dissect what it means for Palantir.
Implementing AI for the government
Palantir released a new article today in response to the National Institute of Standards and Technology’s request for information on, here’s a summary of the key points:
Palantir has engaged with the Biden-Harris Administration's initiative on AI by responding to a NIST request for information, emphasizing their ongoing contributions to AI policy discussions and offering recommendations for promoting safe, secure, and trustworthy AI.
The response outlines four focus areas within two main themes: developing guidelines, standards, and best practices for AI safety and security, and advancing responsible global technical standards for AI development, drawing from Palantir's extensive experience in AI/ML software development.
Palantir stresses the importance of foundational investments in digital infrastructure for AI, including access controls, data protection, governance, collaboration, and iterative development, to ensure AI systems are safe and trustworthy.
The company advocates for a comprehensive testing and evaluation (T&E) process beyond red-teaming, suggesting a mix of basic, advanced, operational, and simulation strategies to assess Generative AI and LLMs effectively.
Palantir highlights the critical role of privacy-enhancing technologies (PETs) in protecting privacy and civil liberties within AI applications, urging NIST to adopt a broad definition of PETs that includes core data protection functions.
The response also addresses the creation of beneficial and responsible global technical standards, recommending the U.S., through NIST and other efforts, take a leadership role in coordinating international AI regulatory efforts to overcome the challenge of competing standards.
While this isn’t huge news, it further shows Palantir’s willingness to cooperate with governments on helping them with AI.
Palantir cooperation with governments in the implementation of AI is deeply rooted in the company's origins and mission. By working with governments, Palantir can apply its technology to critical areas such as defense, intelligence, law enforcement, and public health, where effective data analysis can have significant implications for safety and well-being. Palantir's AI solutions enable government analysts to quickly derive insights from data, leading to more informed policy-making and resource allocation. While the space gets more competitive, we need to make sure our name is top of mind to government officials, and issuing RFI’s like this help the US gov continue to remember why Palantir is a crucial name when it comes to getting more deals in the AI space.
That’s it for today — thank you for reading and I’ll see you tomorrow in your inbox!