Palantir: The "Sleeper" of the AI Revolution

Palantir's Artificial Intelligence Platform (AIP) has the potential to become a massive product. Palantir reported its first profitable quarter according to generally accepted accounting principles earlier this month.

With this momentum, the company's AI strategy aims to "conquer the entire market." Nvidia CEO Jensen Huang referred to the November 2022 launch of ChatGPT as the "iPhone moment" of the AI industry, triggering a race among tech companies, both large and small. Microsoft quickly acquired a 50% stake in OpenAI, the company behind ChatGPT. At the same time, Google, Meta, and Alibaba rushed to develop their own AI language models.

However, many investors struggle to distinguish the signal from the noise. Amidst the frenzy, several companies are opportunistically riding the wave of AI popularity. On the other hand, some are legitimate players in what is expected to become a massive industry.

Palantir (NYSE:PLTR) emerges as a steadfast player in the data analytics industry, with extensive experience in utilizing AI to solve complex data problems. The company has a long track record of handling massive datasets for clients with sensitive information, such as the National Security Agency (NSA), the Federal Bureau of Investigation (FBI), and the United States Army.

While the company has been leveraging AI since its inception, it is only recently that Palantir has started exploring generative AI models similar to ChatGPT. The company recently announced its Artificial Intelligence Platform (AIP), which allows businesses to connect AI models to their private data, providing real-time insights into their operations.

Thus far, this powerful data analytics company has been a "sleeper" in the AI field, not participating in the past surges that drove significant movements in stocks like C3.ai (NYSE: AI), Nvidia (NASDAQ: NVDA), and Microsoft (NASDAQ: MSFT).

But the tide is changing. Multiple bullish catalysts are emerging, such as the company's recent earnings report and the "record demand" for its new tool, the Artificial Intelligence Platform (AIP).

First Quarter Results: Just Around the Corner

Palantir released its first-quarter results earlier this month, receiving accolades from investors and witnessing a stock surge of over 75% since the report's publication.

The company achieved its first profitable quarter according to Generally Accepted Accounting Principles (GAAP), with earnings of $0.05 per share compared to $0.23 per share in the first quarter of the previous year. It also recorded a healthy 18% increase in topline revenue, reaching $525 million. Most notably, the company expects to maintain profitability for the rest of the year, with an impressive revenue growth forecast of 25-30%.

Much of Palantir's growth in the first quarter was driven by Foundry, the company's flagship data analytics product, which recently received a complete overhaul.

AIP: A Game-Changer?

Palantir has just unveiled its new product, the Artificial Intelligence Platform (AIP), which, according to CEO Alex Karp, is experiencing demand unlike "anything he has seen in 20 years of being involved with Palantir."

AIP is a platform that enables customers to deploy language models similar to ChatGPT within an enterprise computing system, with access to private data. While tools like ChatGPT are excellent, they are trained on very general data. The underlying idea of AIP is for the model to access an organization's entire dataset, providing deep insights into its operations.

The goal of AIP is to offer customers a real-time visualization of all aspects of their business while establishing basic rules and limits on the data that models can access and what they can do with it.

The company is gradually rolling out the platform but showcased a demonstration to a large insurance company, and the head of data said it was "years ahead of anything they had seen."

One of Palantir's AIP demonstrations showcased how it could help a manufacturing company respond to a hurricane near one of its distribution centers, deciding how many customer orders would be affected and how to react by diverting trucks or canceling orders.

Palantir's extensive experience in dealing with institutions like the Pentagon, handling highly sensitive data, provides a significant advantage in setting guardrails and safeguarding customer data compared to third-party language models.

Can Palantir Become an AI Leader?

While OpenAI is in the spotlight, a recently leaked Google memorandum tells a different story about AI dominance. The note claims that the open-source community is "outpacing" both Google and OpenAI in AI model development and that proprietary models like GPT-3 and Google Bard will eventually lose their edge.

For this reason, Alex Karp told investors on a recent conference call that the company's AI strategy is simply to "capture the entire market."

Taking this into account, Shyam Sankar, Chief Operating Officer of Palantir, believes that long-term corporate value lies in the application of AI, rather than just its development. Palantir is in a unique position because its advantage lies in maneuvering through intricate and massive datasets of secretive organizations with sensitive data, such as the CIA.