🤖 Palantir in AI: Hype Becoming Reality?
The AI spotlight is on
Editor: Emanuele Marabella
PLTR 0.00%↑ is up ~50% in a few days after spectacular Q4 results driven by AI demand.
Some already see an "AI Bubble."
Can the recent hype become an opportunity for Palantir to deliver real growth?
👋 Hi, I’m Arny. Please hit the ❤️ button if you enjoy today’s article.
1. Palantir is now ready to tackle the market
Differently from the 2021 period, when Palantir became famous in the financial world due to the "MEME" status, Palantir now has the toolkits to exploit the recent spike in visibility after spectacular Q4 results.
The US Commercial segment is growing at ~70% YoY backed by "unprecedented demand" for its AI offering.
With Bootcamps, a very quick and efficient Go-To-Market strategy (5 days vs 5 months pilot), Palantir can now properly serve customers efficiently to capture the demand.
To understand this, we can think of an example:
Having high visibility without a solid product to back it up is like having a spotlight without a stage.
It may draw attention, but without something substantial to showcase, the audience will quickly disperse, leaving the potential for success untapped.
This is what happened a few years ago as Palantir was not ready yet to tackle the market at scale. Things are now different.
With Bootcamps, Palantir can transform views into $$$.
As Seneca said, "Luck is when preparation meets opportunity." Palantir has been preparing for 20 years to meet this once-in-a-lifetime opportunity by building a full stack operating system for the modern enterprise.
Now it can capitalize on the most disrupting trend of the decade.
2. AI growth becomes a self-fulfilling prophecy
Major consultancy firms like McKinsey and BCG, dropped their AI reports urging their clients to invest in AI, explaining how they can't be left behind into one of the most secular trends.
All major VCs and Financial institutions agree on the immense potential of the AI market, which is considered to be a paradigm shift like the Internet.
This creates a powerful reinforcing feedback loop:
The more the business world sees a huge opportunity in AI, the more it invests in it.
This, in turn, increases the size of the market and stimulates further innovation.
At the World Economic Forum 2024, Davos, almost all conversations gravitated around AI. This is similar to the ESG trend. When the trend became established each company needed to show its "ESG strategy," regardless of their genuine interest in it.
AI creates an urgent need for corporate executives to implement an "AI strategy" into their business.
We are still very early on the implementation path.
If managers don’t capture the opportunity, their competitors will.
CEOs can’t be left behind.
A recent proof of the disruptive interest in AI comes from the latest results of NVDA 0.00%↑, which provides chips needed to train and run AI models.
Its Data Center unit delivered in FY24, a 217% YoY growth to almost $50bn:
3. Partners can't miss the opportunity
In 2021, Palantir didn't have a mature partnership ecosystem. Now, according to its website, Palantir has 21 partners, which include the 3 key cloud providers (AWS, Azure, GCP) and the biggest consulting firms (Accenture, Pwc, KPMG).
These partners are resellers for Palantir’s solutions.
Once there is striking evidence that Palantir is in hot demand, these partners have a strong incentive to push Palantir's offering to their clients so that they get reselling fees.
From Palantir's perspective, partnerships are crucial to:
boost sales at scale;
reach also smaller companies;
grow at a very low marginal cost.
I learned that channel partners could count up to ~70/80% of the total software sales for established B2B software companies.
Given how recent most of Palantir’s partnerships are (the website has just been created), I believe the channel partner impact is still very low, meaning there is an untapped growth potential.
By seeing Palantir US Commercial growing 70%, partners can't miss the opportunity to talk Palantir to their clients.
At this point, Palantir has already demonstrated enough successful cases in virtually any industry to feed this loop.
Conclusion
The recent spike in AI interest is not only positive for the stock, but it can also transform the growth trajectory creating a powerful feedback loop, potentially empowering growth above 30%.
“AIP is the future of our company, and we believe that it will become the dominant platform for the entire industry.” - Alex Karp, 2024 Letter
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Yours,
Arny
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LinkedIn: Arnaldo Trezzi
Disclaimer: The views and opinions expressed above are current as of the date of this document and are subject to change without notice. Materials referenced above will be provided for educational purposes only. None of the above will include investment advice, a recommendation or an offer to sell, or a solicitation of an offer to buy, any securities or investment products.
"This is similar to the ESG trend. When the trend became established each company needed to show its "ESG strategy," regardless of their genuine interest in it."
Their is a big difference between the two. With ESG, it was/ is being pushed on companies, many who if they had a choice would want little to do with it. With AI, no one is pushing AI on anyone. It a business decision and providing companies go with the right technology, it is quite simply the better way of doing business and it shows up directly on the bottom line.
I say "providing companies go with the right technology" because their are a lot of other companies flogging products under the "AI banner" that are of dubious value to the customer.