This week was a soap opera in the markets. The whole fiasco with DeepSeek was interesting to unfold as it looks like there may have been some dishonesty on their part. Turns out yet another Chinese company (this one operated by a Chinese Hedge Fund) may have been lying to the Western media. Shocking, right? They stated their LLM cost only $6 million to develop without the use of Nvidia chips, and those claims have been disputed by American and Chinese stock analysts throughout the week. I personally am wondering if the hedge fund that created DeepSeek shorted NVDA last week prior to releasing this "news". But anyways, now the U.S. Commerce Department is looking into the matter, so some clarity will arise.
But this DeepSeek story relates to my favorite stock, Palantir:
The market's reaction to DeepSeek was, in my opinion, an excessive overreaction. For the past two years, Palantir's management has consistently maintained that Large Language Models (LLMs) like ChatGPT or DeepSeek would inevitably become commoditized. They assert that the real value in AI does not reside in the LLMs themselves but rather in the sophisticated software that effectively integrates these models with specific business data and workflows. This domain is precisely where Palantir excels, and their insights have proven to be spot-on. At this juncture, whether DeepSeek cost $6 million or not is immaterial, given the proliferation of available LLMs. Instead, the focus should rightly remain on Palantir's profound capabilities in this space.
Q4 Earnings Call
Palantir Technologies is gearing up for its eagerly anticipated earnings call on Monday, February 3rd, after the market closes. The potential outcomes have sparked significant interest, with projections suggesting that stellar results could propel the stock to $100 or more, while a miss might see it drop to $60, presenting a potential buying opportunity.
In the buildup to this earnings call, there has been vigorous debate among Wall Street analysts on prominent financial networks like CNBC and Bloomberg, with many challenging Palantir's high valuation. Despite these "expert" opinions, I maintain a strong conviction in Palantir's valuation and its long-term prospects.
Regarding the upcoming earnings, I anticipate a healthy beat from PLTR, although this alone may not satisfy Wall Street's expectations. For the stock to truly surge in Monday's after-hours trading, the growth rate needs to be exceptionally high. It's widely acknowledged that the company is on an upward trajectory, but only aggressive growth figures will push the stock into triple digits this month. Whether this will occur remains to be seen. However, even if we witness slower growth and a subsequent sell-off, my stance remains bullish in the long term.
They are on the brink of a transformative phase in its operational and strategic development, aiming to redefine its role within the tech industry over the next five years. Here's a closer look at the company's future vision, its recent advancements, and the strategic shifts that are setting the stage for its next phase of growth:
Future Vision
Palantir is set to evolve significantly over the next five years, transitioning from being a provider of standalone digital twins to a platform that connects these into an interconnected network. This will enable seamless transactions across and along supply chains, unlocking exponential operating leverage and dramatically improving financial outcomes.
This year marked a pivotal advancement with the introduction of Warp Speed in Q2 2024. This new offering—an operating system designed to enhance manufacturing efficiency—represents the first repeatable and scalable computing framework from Palantir. It enables customers to optimize their manufacturing processes across various industries. Dubbed “valuable compute,” this customized, purpose-built computation is tailored to customer needs and marks a significant shift in how computing power is utilized across sectors.
As Palantir builds out its network of ontologies, the deployment of Warp Speed exemplifies a strategic step towards creating a true network-centric approach. Palantir’s ability to deliver instances of valuable compute will boost the efficiency of any activity its customers engage in, potentially making Palantir's offerings a baseline requirement for competitiveness in various industries, much like Excel’s dominance in finance.
The Cloud Ecosystem
Palantir's evolving strategy positions it at the top of the cloud ecosystem funnel, transforming the way companies approach cloud services. Businesses are likely to start with Palantir's valuable compute as a gateway, streamlining their access to broader cloud capabilities and bypassing traditional raw compute providers like Amazon and Google.
This strategic repositioning is anticipated to mirror Microsoft’s post-Windows strategy, focusing on facilitating transactions and interactions between interconnected ontologies. With these developments, Palantir is expected to grow into one of the world’s leading computing companies, potentially reaching a market cap in the multi-trillion-dollar range.
Why Palantir Stands
Palantir is often likened to an operating system for data and global decision-making, having firmly established itself in the realm of Automated Governance. The company has revolutionized data management within large organizations by transitioning from traditional assembly-line analytics to a more dynamic, integrative model. This shift not only enhances decision-making processes but also significantly reduces inefficiencies across the board.
Analyses suggest that Palantir's strategic approach could mirror the impressive growth trajectory of Salesforce in the 2010s, which notably optimized workflows and streamlined operations. However, Palantir's strategy extends beyond corporate realms to encompass governmental structures, amplifying its impact and suggesting a potential for even greater, more sustained growth in the long term. This ambitious scaling showcases Palantir's unique market position and underscores its capability to drive profound changes in data utilization and decision-making on a global scale.
Looking Ahead..
As we approach the earnings call, the financial community is keen to assess how Palantir's strategic initiatives and market expansion efforts are reflected in its financials. With its innovative data integration and AI application, Palantir is not merely improving its own growth prospects but is also redefining industry standards for technological advancement and strategic data utilization.
The ongoing discussions about Palantir's valuation and the optimism surrounding its future are grounded in its revolutionary approach to big data and decision-making support. This earnings call will be crucial for stakeholders to better understand Palantir's current achievements, but the guidance and growth figures should be a better of indicator of where things will go as posed to the Q4 financials.
If you're interested in learning more about Palantir and their long term vision for the industry, check out this fresh interview with the CEO which aired yesterday.
