At the time, the investment community was pretty torn on Palantir's prospects. On one side of the equation, the retail investing community was enamored with it -- thanks in large part to the company's CEO, Alex Karp. But on the other side, institutional money managers and Wall Street analysts remained widely skeptical, with many referring to it as a consulting firm or government contractor, and less so as a technology innovator.
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Over the last four years, Palantir has experienced many ups and downs. However, since the artificial intelligence (AI) revolution took the world by storm in late 2022, it has steadily climbed the ladder and emerged as a formidable leader in the space.
Below, I'm going to explain how Palantir catapulted to leadership of the AI pack and explore several catalysts that should help continue generating growth over the long run.
Palantir is sitting with some pretty exclusive company
In early 2023, Palantir made a chess move for the ages. The company released its fourth major software product, the Artificial Intelligence Platform (AIP). Through immersive seminars called "boot camps," prospective customers can demo AIP and identify uses for the company's software while figuring out how it can fit into their broader technology stack.
Over the last year and a half, AIP has become an absolute bellwether for Palantir, helping the company to reaccelerate its legacy government business by winning larger contracts, while simultaneously serving as a ticket into the private sector. AIP's widespread adoption has fueled a new phase of growth underscored by accelerating revenue, wider profit margins, and consistent positive net income and free cash flow.
For several quarters, some skeptics put forth the idea that the company was only benefiting from the AI frenzy, and that it's growth could very well contract should artificial intelligence wind up being a bubble.
But over time, this doubt-filled narrative has dissipated, and the business has finally joined some pretty exclusive company. For starters, it earned a spot in the S&P 500 earlier this year, and as of this writing, it is the best performing stock in the index in 2024.
The combination of an encouraging growth outlook and entry into the S&P 500 has fueled institutional buying in the stock -- adding a layer of legitimacy to the company beyond being a darling of the retail community.