QV Alert – Palantir Is Super Expensive But So Exciting

This is a super strong chart. The shares could go much higher but are likely to be volatile.

Below is an excellent explanation of what Palantir and Karp are all about.

Alex Karp, the chief executive of Palantir, knows his products can be dangerous. Built to extract insights from torrents of data with machine learning and AI, his company’s software is optimising manufacturing and supply chains but also warfare and kill chains, helping target weapons in Ukraine and across the Middle East. To some, accelerated AI development is an existential threat worthy of a pause. Karp—a brash, self-described socialist who earned his philosophy doctorate in Germany before Palantir chairman Peter Thiel tapped him to run the startup two decades ago—looks at those dangers differently. The way he sees it, not moving fast is the existential risk.

“Our goal as a company is to help the United States and its allies avoid war,” says Karp. “The only way to do that is to project such overwhelming technological and strategic superiority that we scare the daylights out of our adversaries.” 

That includes building Maven, the battlespace decision-making system at the heart of the Pentagon’s AI efforts. (Palantir first picked up the contract after Google, prodded by employee protests, walked away from the project in 2018.) Early versions of the software have proved pivotal for surveillance and targeting over Ukraine, and have accelerated the U.S.’s ability to attack Houthi rocket launchers in and around the Red Sea. A targeting operation that required 2,000 people in 2003 now needs just 20.

“The AI revolution is one in which small groups can drastically outperform much larger groups,” Karp says. “Wars are now won on the basis of superior AI and electronic warfare.”

After years in the shadows, where it helped U.S. and foreign governments find terrorists and roadside bombs, Palantir has been expanding its reach on the battlefield and the homeland, too, helping wrangle data and deploy algorithms in all kinds of businesses, from mining to healthcare, in order to connect dots, root out inefficiencies, and “bring your enterprise back to its principal purpose,” says Karp. According to the company, one large American insurer recently used 78 AI agents on Palantir’s Artificial Intelligence Platform to automate part of their underwriting process, shortening work that once took two weeks to three hours. 

Both on and off the battlefield, Karp sees most of AI’s value accruing to those with preexisting scale, capital, and software power. And that bodes well for his company too. “It’s like back to the future,” he says. “We’re at the forefront of managing large language models and AI, just like we were at the forefront of managing data.” 

Palantir’s platform is designed to ground any number of AI models in an enterprise’s particular set of data, logic, and actions. Its meticulous approach to the “semantics” of an organization’s operations was initally developed to integrate piles of often sensitive data alongside older machine learning tools. Karp says this architecture also makes large language models useful, by providing heightened transparency, security, and guardrails around data, models and outputs. “It turns out that the software needed to augment human decision-making is the same software an LLM needs,” he says. 

Wall Street—and a diehard online shareholder fanbase—seems to agree: Palantir’s stock price has exploded this year, to the point where Karp’s company—one with fewer than 4,000 employees—now boasts an ear-popping market cap of $174bn, greater than defense giants like Raytheon or Lockheed Martin. After years fending off “the haters,” it’s vindication, he says. “There should be a reward for the best products in the world.”

The critics haven’t retreated, even from within. Palantir’s unapologetic support for Israel’s defense establishment, its contracts with U.S. immigration enforcement agencies under Donald Trump, and Thiel’s politics have led to employee unrest. And many ethical and legal questions about AI-driven warfare and surveillance remain open. Karp says Palantir is focused on “not replacing human judgment, but augmenting it,” and he has called for rules to keep humans in the loop in critical domains, as well as for stronger personal data protections. The company has told investors it rejects clients “whose positions or actions we consider inconsistent with our mission to support Western liberal democracy and its strategic allies.” “All sorts of things I’m constantly refusing,” Karp insists, including, he says, pressure to work in China and Russia. 

But nearly everywhere else, Palantir has been busy, especially since 2020, when the U.S. and the U.K. used the firm’s software to manage vaccine distribution. Karp’s unabashed pro-West stance—and his takes on defense spending, wokeness, and the distractions of Silicon Valley—have also been winning more hearts and minds. His calls to upgrade the U.S. military industrial base already have fans in the next Trump White House; current and former Palantir execs have been involved in the transition, and even the vice president is a Thiel acolyte. (“I’m optimistic about where America is going,” Karp says of the incoming administration.) And his voluble insistence on defending democracy with software has helped fuel a defense-minded counterrevolution in tech, and a new crop of startups building killer AI. 

“What other people view as courage I just view as telling the truth,” he says. “And I do think it has shifted how people at least see these things.”

Fast Company, four-minute read, 8 December 2024

It is no secret that Palantir is an exciting business. It is one of the most highly valued shares in the world with a market value of nearly $170bn against expected 2024 sales of $2.8bn. Don’t even think about the PE ratio which is 372 for 2024.

The company is growing fast but not that fast with sales forecast around $4.2bn for 2026. Earnings growth is impressive with nearly $1bn forecast for 2026 versus a loss of almost $0.5bn for 2021.

The thing that makes Palantir stand out is the story. The group’s business is a software platform that enables the US military, the CIA, allied military and secret service operations, government departments, and, more recently, enterprises to use AI to make their operations dramatically more efficient.

In the last year and a half, it has consolidated its software around an AI platform (AIP). According to CEO, Alex Karp, the software is so good that it sells itself. The group invites prospective clients to boot camps where it demonstrates to clients the difference its software could make. They sign large initial contracts and then look at rolling out the software across their businesses.

This sales technique has proved so successful in what Palantir calls the commercial sector (as opposed to the government) that client numbers have climbed from 14 in 2019 to 321 when last reported for Q3 2024.

Meanwhile, there are exciting developments in the defence sector. Look at this recently announced partnership.

Palantir and Anduril, two leading companies at the intersection of commercial technology and national security, are launching a new consortium to ensure that the U.S. government leads the world in artificial intelligence. Our goal is to deliver the technological infrastructure, from the edge to the enterprise, that can enable our government and industry partners to transform America’s world-leading AI advancements into next-generation military and national security capabilities.

This partnership is focused on solving two main problems that limit the adoption of AI for national security purposes. The first is data readiness. Most useful national security data—government data that are collected and created by sensors, vehicles, weapons, and robots at the tactical edge—are not retained for AI training and algorithm development. Exabytes of defense data, indispensable for AI training and inferencing, are currently evaporating. What should be America’s ultimate asymmetric advantage over our adversaries is instead our biggest lost opportunity.

To solve this, we will utilise Anduril’s Lattice software system and the Anduril Menace family of deployable compute and communications systems to instrument the tactical edge for the government’s secure, large-scale data retention and distribution. Lattice connects directly with third-party defense systems at the edge, delivers autonomy to machine operations, securely distributes their information across a large-scale data mesh, and backhauls all tactical data into government enclaves for the purposes of AI training and inferencing. Menace devices are also purpose-built for the tactical edge, customised down to the silicon level for the unique requirements of national security operations in tactical environments—including, soon, next-generation encryption.

The second problem that we seek to solve exists when processing data at scale. Even with national security data that are retained, no secure enterprise pipeline exists to turn that data into AI capabilities. U.S. companies are developing world-leading models but struggling to deploy them at scale with government partners for defense applications.

To solve that, we will utilise Palantir’s AI Platform (AIP) to deliver a cloud-based data management and AI development capability that operates at the hyper-scale of commercial industry while meeting the unique requirements of national security. This will enable the structuring, labeling, and preparation of defense data for AI training and development at all levels of classification, including Secure Compartmented Information (SCI) and Special Access Programs (SAP). Palantir’s AIP provides a seamless interface for commercial and government AI developers to conduct imitation and reinforcement learning. It also provides a secure pipeline to deploy, retrain, and redeploy those AI models onto national security systems—a process made even easier, faster, and more reliable through the integration with Anduril’s unique edge capabilities.

We will also provide a rapid and ready mechanism to operationalise these new AI capabilities directly through defense production programs that are already fielded. Maven Smart System, powered by the Palantir Platform, provides an enterprise mission command platform that integrates large-scale operational data and utilises AI-based capabilities to improve and accelerate human decision-making across joint missions, such as intelligence and fires. Similarly, Anduril’s Lattice software platform provides an edge-based mission autonomy platform that integrates directly with robotic systems and utilises AI-based capabilities to automate and orchestrate their conduct of joint missions, such as air defense and reconnaissance. Anduril and Palantir are joining these complementary systems together, providing a seamless operational capability from the edge to the enterprise that serves as a deployment platform for new AI applications that anyone can build. This platform is already in place and in use by Anduril and Palantir for their own corporate purposes and with government contracts that enables this work to begin immediately.

Ultimately, Palantir and Anduril expect to expand the partnership to other industry partners that have unique contributions to make to this unique mission. No single company is capable of delivering on the promise of AI for national security. It takes a team of companies that are willing and able to ensure that the U.S. government remains the world leader in fielding advanced technologies that keep our citizens safe.

Anduril website.

Privately funded Anduril describes itself as ‘transforming defence capabilities with advanced technology’.

The battlefield has changed. How we deter & defend needs to change too.

Security threats are evolving at machine speed. To keep pace, Anduril puts products ahead of process and builds technology to bring the United States and partners quantum leaps ahead in capability.

Anduril website

Anduril was founded in 2017 and already has 3,500 employees. It is an amazing business that recently raised $1.5bn to fund a huge new manufacturing facility.

Today, Anduril Industries announced it has secured $1.5bn of funding for its Series F round to hyperscale defense manufacturing. This funding will enable Anduril to increase hiring, enhance processes, upgrade tooling, increase resiliency in its supply chain and expand infrastructure. Anduril is also investing in Arsenal, the manufacturing platform for modern warfare. With Arsenal, Anduril’s goal is to manufacture and produce tens of thousands of autonomous weapons systems addressing the urgent needs of the United States and our allies.

Co-led by Founders Fund and Sands Capital, Anduril’s Series F values the company at $14bn and includes new investors Fidelity Management & Research Company, Counterpoint Global, and Baillie Gifford, as well as major commitments from existing investors including Altimeter and Franklin Venture Partners.

A New Paradigm in Defense Production
As the United States and our allies attempt to gain affordable mass with autonomous systems, weapons, and munitions, the defense industrial base must be capable of producing orders of magnitude more than it is currently producing today. To support that effort, Anduril is investing our own dollars to hyperscale weapons manufacturing using the same agile, rapid, and scalable processes found in the commercial manufacturing sector.

The conflict in Ukraine has exposed a critical vulnerability in the United States’ ability to respond to crisis. In a major conflict, use of weapons and munitions would quickly exceed supply — it is projected that the United States would run out of weapons in the first few weeks. At the same time, the traditional defense industrial base has faced significant challenges in scaling production to meet demands. Slow and low production rates, inflexible processes and the development of exquisite, defense-specific, bespoke systems have hindered the ability to respond quickly to need. Lead times to replenish key weapons and munitions average two years.

Introducing Arsenal: The Manufacturing Platform for Modern Warfare
Arsenal is a software-defined manufacturing platform that is optimised for the mass production of autonomous systems and weapons. To achieve hyperscale, the Arsenal platform leverages four principles: design for simplicity and scale, resilient supply chain, software-defined production, and central infrastructure – a factory called Arsenal-1.

Design for simplicity and scale:
Arsenal dismantles the traditional defense production preference for complexity by designing products that are as simple as possible, eliminating unnecessary materials, parts, and specialised processes. In addition, the Arsenal design leverages a nonlinear approach to production, driven by modular and flexible design decisions.

Resilient supply chain:
Arsenal integrates a commercial supply chain wherever possible, a strategy that brings efficiency and agility to defense production. Nearly 90pc of Anduril’s products can be developed and manufactured at hyperscale using commercially available components and materials. Access to this diverse and reliable pool of components reduces lead times and production costs.

Software-defined production:
The Arsenal platform is software-defined, and the software serves as a unified system to integrate the design, development, and mass production stages for all Anduril products. Arsenal consists of a common enterprise resource planning system and a proprietary manufacturing execution software system to integrate threat-based operational analysis, modeling, simulation, drawing, testing, bill of materials management, work orders, production, and data management across the product lifecycle.

Central facility in Arsenal-1:
To join the existing family of factories, Anduril is investing hundreds of millions in the development of Arsenal-1. Upon completion, Arsenal-1 will be more than five million square feet of production space that will employ thousands of people and is designed to produce tens of thousands of autonomous military systems annually.

Arsenal-1 provides maximum flexibility to reallocate the most critical manufacturing resources — people, capital, machines, and materials — to meet new requirements, launch new products, or scale production to meet surges in demand, indefinitely. This is simply not possible when those critical resources are spread out across multiple, distributed geographic areas.

Anduril’s commitment to agile, responsive manufacturing has already been demonstrated globally. Most recently, Anduril announced a $75m investment to increase manufacturing and production capacity for solid rocket motors in Mississippi. In addition, Anduril also announced the opening of its Rhode Island production facility to enable Anduril to increase production to 200 AUVs [unmanned aerial vehicles] per year. This complements our existing network of current factories in California and Georgia as well as our Ghost Shark factory in Australia.

Consistent with Anduril’s broader approach, Anduril is taking on the risk of developing Arsenal by using its own dollars to invest in people, process, tooling, supply chain resiliency, and infrastructure. Anduril is committed to transforming US and allied defense capabilities by combining modern software expertise with a rapid and differentiated approach to hardware development and manufacturing. From cutting-edge counter drone systems to extra-large autonomous underwater vehicles, Anduril has proven it can deliver highly-performant, next-generation, software-defined capabilities on a timeline and scale that matters.

Anduril website news, 7 August 2024.

You can tell a great deal about businesses by the company they keep. Palantir is partnering with exciting enterprises and has an exciting future. Both Anduril and Palantir promise more partnerships ahead for the joint venture which has the potential to revolutionise the US’s defence capability, a vital necessity in a dangerous world.

The mix of defence, government and commercial work has huge potential because of the opportunities for cross-fertilisation of technology.

Share Recommendations (9 December 2024)

Palantir Technologies PLTR

I suspect Palantir is a great candidate for a $-cost-averaging program. This turns share price volatility into an asset. Buy some shares on the first day of every month, every quarter, every six months, whatever works for you and I suspect you will do very well.

The shares are vulnerable to sell-offs because of the combination of huge profits with the price up 12-fold since January 2023, and a demanding valuation. However, my experience is that this combination is often found when a company is poised for a multiyear increase in value.

Sometimes it can pay to look back in time to understand better what is happening at a company. This is what they said in Q4 2023

Our U.S. commercial business continues to be a significant driver of our growth, a trend that we expect to continue. 

In the U.S. commercial market, our revenue increased 70pc year-over-year to $131m in Q4 2023 from $77m the year before, bringing our total U.S. commercial revenue for 2023 to $457m.

We anticipate that our U.S. commercial revenue will exceed $640m in 2024, representing a growth rate of at least 40pc from last year.

The demand for large language models from commercial institutions in the United States continues to be unrelenting. Every part of our organisation is focused on the rollout of our Artificial Intelligence Platform (AIP), which has gone from a prototype to a product in months. Our momentum with AIP significantly contributes to new revenue and customers. 

It once took weeks and months, if not longer, for data integration and analytical software platforms to be set up and integrated with a customer’s existing systems.  

AIP can now be up and running in as little as a few hours. 

Enterprises across commercial sectors that have invested hundreds of millions of dollars in lackluster or failed data integration projects are now seeing results in days. 

The proliferation of and interest in large language models obscures the simple fact that the sophistication and power of such natural language processing systems mean little without an effective way of allowing those systems to interact with an organisation’s underlying and proprietary data, which is often scattered across hundreds if not thousands of disparate repositories. AIP is that connective tissue, and the organic and unconstrained demand for its capabilities is unlike anything we have seen in two decades. 

We conducted fewer than 100 commercial pilots in 2022. Since introducing AIP last year, we have already conducted over 500 bootcamps on top of the more than 130 pilots we undertook in our commercial business in 2023.

And while we have just introduced AIP in the marketplace as our fourth platform, our product pipeline is more robust than it has ever been in our history.  

AIP is the future of our company, and we believe that it will become the dominant platform for the entire industry. 

Alex Karp, CEO, Palantir Technologies, Shareholders’ Letter, Q4 2023, 5 February 2023

Above is a share which has been a disaster for QV, Super Micro Computer. Let’s see how $-cost averaging might be working with this share. Suppose we began investing in the June 2022 quarter when the shares first broke higher from a large consolidation, reaching a new peak. We invest equal amounts each quarter. We would have invested $11,000 but the value would be $36,122.

If the shares are reversing higher and there are signs they might be this could prove a hugely successful investment.

Back To Palantir

Alex Karp is such a cool, crazy guy, watching him talk he is so animated it is like watching somebody dancing with that mane of wild hair.

We absolutely eviscerated this quarter, driven by unrelenting AI demand that won’t slow down. This is a U.S.-driven AI revolution that has taken full hold. The world will be divided between AI haves and have-nots. At Palantir, we plan to power the winners. 

Alex Karp, CEO, Palantir Technologies, Q3 2024, 4 November 2024

What Makes Palantir Amazing

I want to tell you briefly why I am so excited about Palantir Technologies. Not only is it a brilliant company, an overnight success which has been 10 years in the making but look at those following winds.

Software forms around one per cent of the $1 trillion US military budget. Karp says it should be at least five per cent and if it goes there Palantir is phenomenally well placed.

There are 25,000 plus commercial enterprises in the US alone which could benefit from using Palantir’s software. So far 321 of those enterprises do use it, up from 14 in 2019.

Europe and the Rest of the World are way behind the US in implementing artificial intelligence even though Palantir’s largest office is in London. They need to get their act together which will mean more business for Palantir.

The company’s world-beating AIP platform which has put a rocket under the business is less than two years old.

The software sells itself, hence the company’s ability to use boot camps (try it and you will buy it) with huge success for its marketing. The boot camp approach is another recent development. Better still, on boot camp deals, the companies sign $1m, $5m and $10m initial contracts and then roll them out across the enterprise.

The analyst community is not convinced. There is a stock market saying that when all the analysts recommend buying it is time to sell; that is emphatically not the case here. The average price target in the analyst community is $38, way below the present price.

No question that the shares are highly valued at over 50 times the expected sales. So buy some every month, every quarter, whatever and that high valuation won’t matter and volatility will be your friend. This is one hell of a company. You need to be involved.