Palantir Technologies: Revolutionizing the AI Market
In the fast-paced world of technology, it’s not uncommon for groundbreaking advancements to capture the attention of both Main Street and Wall Street. One such development that has taken the industry by storm is generative artificial intelligence (AI). These next-generation algorithms have the power to revolutionize productivity by performing tasks that were once unimaginable. From drafting original documents to summarizing data, writing and correcting computer code, and even creating presentations from existing data, generative AI is reshaping the way we work.
Bill Gates, the co-founder of Microsoft and a renowned technology visionary, has expressed his belief in the transformative potential of AI. He predicts that AI will completely change how we use computers and disrupt the software industry. Gates goes on to suggest that within the next five years, generative AI “agents” will handle everyday tasks that were previously inconceivable.
The economic value of the generative AI market is estimated to exceed $1 trillion, with some projections reaching much higher figures. This presents a significant opportunity for companies and shareholders who are well-positioned to capitalize on this trend. One such company that has been at the forefront of AI research for years is Palantir Technologies (PLTR -2.29%). As a pioneer in the field, Palantir represents a compelling addition to any AI portfolio.
Palantir Technologies was founded by entrepreneur and PayPal co-founder Peter Thiel. In the aftermath of the 9/11 terrorist attacks, Thiel envisioned algorithms that could analyze vast amounts of data collected by U.S. intelligence and law enforcement agencies. These algorithms would identify patterns and detect potential terrorist activities before they could occur. Palantir’s groundbreaking AI systems quickly gained popularity within the intelligence community and expanded to various government agencies, including the Federal Bureau of Investigation, National Security Agency, and Department of Defense.
However, the true potential of Palantir’s AI systems emerged when it became evident that they could be utilized for data mining and business analytics services for enterprises. This realization opened up a vast and growing opportunity for the company.
What sets generative AI apart from previous branches of AI is its ability to significantly increase productivity. Time is money, and businesses of all sizes are eager to tap into the resulting benefits. While estimates vary, the AI opportunity is projected to reach $1.3 trillion by 2032, according to Bloomberg Intelligence. More optimistic estimates from Cathie Wood’s Ark Investment Management suggest that AI software alone could drive incremental spending of $13 trillion by the end of the decade. With the market still in its infancy, the exact size of the opportunity remains uncertain. However, one thing is clear: an opportunity of this magnitude cannot be ignored.
Palantir’s recent financial results paint an impressive picture of the company’s potential. In the fourth quarter, Palantir’s revenue reached $608 million, marking a 20% year-over-year increase and a 9% sequential increase. The surge in revenue was driven by a 70% increase in U.S. commercial revenue, fueled by the demand for Palantir’s generative AI-powered Artificial Intelligence Platform (AIP). As a result, Palantir achieved its fifth consecutive quarter of profits under generally accepted accounting principles, with an adjusted EPS of $0.08. Looking ahead, management forecasts at least 40% growth within its U.S. commercial segment over the next 12 months.
Palantir’s success can be attributed to its ability to deliver results quickly. Projects that previously took weeks or months to complete are now up and running in just a few hours. To meet the growing demand, Palantir has conducted over 500 “boot camps” for customers since the launch of AIP. These immersive sessions enable participants to go from zero to implementing use cases in just one to five days. The company notes that the demand it is experiencing is unlike anything it has seen in the past two decades.
Despite its remarkable rise in the past year, Palantir stock remains surprisingly undervalued. With a price/earnings-to-growth ratio of approximately 1, the stock presents an attractive investment opportunity. Coupled with the significant demand for its products, increasing sales, and profitability, Palantir Technologies is well-positioned to capitalize on this once-in-a-generation opportunity.
Disclaimer: The author of this article holds positions in Microsoft, Palantir Technologies, and PayPal. The Motley Fool has positions in and recommends Microsoft, Palantir Technologies, and PayPal. The Motley Fool recommends long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short March 2024 $67.50 calls on PayPal.