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Campbell: Palantir Isn’t “Real AI?”

Posted June 04, 2024

Chris Campbell

By Chris Campbell

Campbell: Palantir Isn’t “Real AI?”

Palantir, my stock of the year, has been having a rough time lately. My original thesis was that PLTR was a government darling and receive stacks of government money to spy on you. Since you can’t stop it, you might as well profit.

After popping twice since that fateful October day in Vegas, PLTR, while still in the green, hasn’t rallied the way I had hoped.

Then, my good friend and colleague Chris Campbell wrote this piece last week. Chris is a part of James Altucher’s team and is a tech expert.

He wrote this below, unsolicited.

It made me feel so good, I had to share it with you.

Good reading!

Campbell: Palantir Isn’t “Real AI?”

One minute, you're a financial genius, the next, you're contemplating moving to a yurt in Mongolia.

That’s what it’s like trading on mainstream financial media sound bites.

(Don’t ask me how I know.)

Ignore it. Good news and bad.

Stanley Druckenmiller sold Nvidia to buy Palantir? Ignore!

Druckenmiller’s track record for PLTR is terrible. He’s only lost money on the stock.

On the other hand, Peter Thiel just sold a bunch of PLTR. Isn’t this bearish? IGNORE.

Insider sales are most often planned long in advance for reasons unrelated to the company’s immediate performance. (The SEC makes sure of that -- cough cough Martha Stewart.)

By the way, this principle applies to all PMG picks in our portfolio.

If you focus on financial media sound bites, you’re going to be a confused nervous wreck.

For example…

RBC Capital Markets analyst Rishi Januria claims PLTR is “overhyped” because it is not “real AI.”

He’s not alone in his analysis.

But analysts like Januria miss the point completely.

Let’s explore… and suss out why PLTR’s recent dip is more an opportunity than an omen of bad things to come for the stock.

What Is Palantir? 

Palantir is a software powerhouse dedicated to solving the toughest challenges faced by government agencies and corporations.

From aiding in the hunt for Osama Bin Laden to streamlining emergency response efforts during natural disasters, and revolutionizing supply chain management for major manufacturing companies, Palantir is scary good at what it does.

That’s how they’ve been able to work with some of the world’s largest companies and governments to create breakthrough technologies. (Airbus created Skywise with Palantir years ago, which is now widely used in the airline industry.)

Analysts like Rishi Januria look at Palantir and say, “They don’t have generative AI like ChatGPT, therefore it’s overhyped.” 

Januria is right: Palantir isn’t OpenAI. Instead, Palantir is positioning itself to be the infrastructure that supports these models.

While OpenAI develops AI models like ChatGPT, Palantir specializes in providing the infrastructure and tools to help organizations build, deploy, and manage their own AI models.

This strategy is about enabling other companies to build and optimize their AI models using Palantir's infrastructure.

Palantir's CEO, Alex Karp, stressed that the true value in AI comes from integrating business logic and ethics with large language models (LLMs).

The models themselves are just one piece of the puzzle. The real power lies in how these models interact with a company’s specific business needs and compliance requirements. 

Palantir's product, Artificial Intelligence Platform (AIP), acts as the orchestration layer, helping businesses make sense of and effectively use AI models to drive specific business outcomes.

This infrastructure-first strategy is Palantir’s edge -- and they’ve been way ahead of the curve.

Let me give you an example. This just happened this week.

Palantir Strikes New Deal With Eaton 

If you’re not familiar…

Eaton is a global power management company that offers energy-efficient solutions for electrical, hydraulic, and mechanical power systems.

They operate in over 160 countries, catering to various industries such as electrical, aerospace, vehicle, and hydraulics.

In the past, Palantir and Eaton used AI to help fix supply chain problems by finding and solving shortages proactively. Now, their partnership is expanding so Palantir can support Eaton's whole AI innovation process. This will help Eaton use AI across all its global operations.

Moreover, Palantir recently secured $12 million from the Department of Energy as part of a previously established larger agreement.

It’s one thing to land a contract with a large company. It’s another to have such deep-pocketed customers that keep coming back for more.

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Palantir Adopts SARs

In other news, Palantir has introduced Stock Appreciation Rights (SARs) to align employee and shareholder interests. SARs reward employees with cash bonuses if the stock exceeds $50, without issuing new shares.

This incentivizes employees to drive long-term growth, benefiting shareholders without dilution. While not impacting the stock price immediately, SARs boost confidence in Palantir's future prospects and align employee goals with increasing shareholder value.

By the way…

Stock-based compensation plans, especially those aligned with performance metrics, have a proven track record of success in driving company growth.

Notable examples include Microsoft, Apple, Amazon, Tesla, and Salesforce. (Maybe you’ve heard of them.)

In the 1990s, Microsoft's extensive stock option plans were crucial in attracting and retaining top talent. Similarly, Apple's use of restricted stock units (RSUs) motivated employees to focus on long-term growth and product innovation, playing a significant role in the success of products like the iPhone and iPad.

The Future Looks Bright 

Palantir's clean balance sheet, with no debt and significant cash, further strengthens its financial position and ability to navigate a chaotic world.

While there are risks to investing in Palantir, such as potential competition and political opposition, the company's strong performance and potential for future growth make it an attractive long-term investment.

As artificial intelligence becomes increasingly important, Palantir's status as a leader in the industry positions it well for continued success.

Keep calm, carry on.

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