It is run by an eccentric philosopher, it delivered Covid vaccines and helped catch Osama Bin Laden and fraudster Bernie Madoff. Shares have stunned Wall Street since Trump won the election.
Our investment guru Anne Ashworth asks whether small UK investors should pile in to Palantir’s 3000 per cent share price surge.
Palantir Technologies used to be a name familiar only among the defence departments and intelligence communities of Washington and Whitehall.
But now this $147bn US software group is being talked about as the next tech superstar.
The fast-growing business, based in Pal Alto, California, is being talked about in the same breath as the $3.5trillion chip designer Nvidia, the tech wonder share of the year so far.
Nvidia leads in the semiconductor sphere. Palantir specialises in the sophisticated analysis of data from multiple sources – which is crucial in modern warfare, but also has wider applications.
The US government is its biggest customer. Its technology was used to deliver Covid vaccines, convict fraudster Madoff, and despatch Al Qaeda kingpin Bin Laden. In the UK, it is best known for the controversial adoption of its data platform in the NHS, with the aim of improving efficiency.
Palantir – which would rather not be talked about given the confidential nature of its contracts with the US and UK governments – has been thrust into the spotlight due to the 274pc leap in its share price this year.
The shares soared following the election of Donald Trump to the White House, based on investors’ view that it will be a major beneficiary of increased spending on national security, coupled with a clampdown on immigration.
Its shares are now close to 3,000pc above their level of a decade ago.
For some, the valuation of the company seems perilously high. But others believe that Palantir could go further still since it is seen as a top ‘Trump trade’.
The company, founded in 2003, is named for the palantiri – the magical ‘seeing stones’ in JR Tolkein’s Lord of the Rings.
That is an apt name, because the company is a 21st century magician in the dark art of the collation and analysis of big data.
In the weeks following the US election, its shares have advanced by 54pc to $63, on hopes for how its technology can be deployed in future, in everything from counter-terrorism to healthcare.
In its early days, Palantir’s objective was to ‘reduce terrorism, while preserving civil liberties’.
Now Palantir has ambitions outside this planet. It is in a partnership to supply the Starlab low-earth orbit commercial space station, a joint venture between the US Voyager company and Airbus.
Back on this planet, Palantir reserves its expertise strictly for Western nations, a commitment that is key to its status as a ‘Trump trade’.
It has gained even more lustre because prominent allies of Trump number among its executives.
Billionaire entrepreneur Peter Thiel is one of Palantir’s founders and its second largest shareholder. Thiel funded the entry into politics of vice president elect JD Vance, for whom he has acted as a mentor.
Thiel, or so it is claimed, persuaded Trump to select Vance as his running mate.
Thiel’s private life is a staple of Hollywood gossip magazines.
There is much speculation about the father-of-two’s liaisons outside his marriage to his financier husband Matt Danzeisen.
His views on other topics are also eyebrow-raising: he has, for example, argued for the establishment of the Enhanced Games in which competitors take every possible performance-enhancing drug.
These notions attract an extra level of publicity because the 57-year-old Thiel is one of the ‘Paypal mafia’, the powerful gang that set up the payments platform in 1998.
Other members of this select fraternity include fellow billionaire Elon Musk, who is taking on a central role in the Trump administration as efficiency czar, assuming an almost vice-presidential degree of power.
Have Thiel and Musk always got along? No. But was the alliance of these conservative libertarians key to winning the support of tech bosses and Silicon Valley billionaires for the Republicans? Yes.
Trump seeks to slash government spending on almost everything except defence – which is Palantir’s core competency.
Its Gotham division deals with defence and intelligence departments, while the Palantir division caters for the private sector, where customers include Ferrari, Fiat Chrysler, Merck and Morgan Stanley.
In Britain there is controversy over Palantir’s relationships with the Ministry of Defence and NHS. The concern surrounds the amount of personal information on Britons that Palantir could obtain from its NHS £330m data systems contract. This week it emerged the Labour peer Tom Watson had joined Palantir’s UK arm as an adviser. Watson, a former deputy leader, has been a vocal privacy crusader.
But controversy surrounds almost every single aspect of the group, from its founders and bosses to the nature of its operations, which are at the centre of the industrial revolution being wrought by ChatGPT and other generative AI software models.
The speed of adoption of AI by the US government drove a 30pc bounce in third quarter revenues at the company.
Brokers such as T Rowe Price say Palantir is particularly adept at integrating data and generative AI to obtain the very best results.
Palantir now envisages that revenues for the whole of 2024 will be between $2.8bn and $2.9bn – an outcome that would surely delight its large investors on Wall Street and in the City, which include the fund manager Vanguard.
Unveiling the third-quarter numbers, Palantir’s CEO Alex Karp declared: ‘We absolutely eviscerated this quarter, driven by unrelenting AI demand that won’t slow down.’
Karp, who founded Palantir with his fellow Stanford Law school student Thiel, is considered to be almost as eccentric as the latter.
This may be due, in part, to a highly revelatory New York Times interview in which Karp described himself as ‘a Jewish, racially ambiguous dyslexic.’
The 57-year old has never learnt to drive, does not like to own things and surrounds himself with bodyguards. His middle name is Caedmon, after a 7th century Anglo-Saxon cowherd and poet who cared for the cattle at Whitby Abbey and learned to compose verse in a dream.
He sees himself as a philosopher rather than a tech boffin, and is also a Democrat.
Notwithstanding, Karp takes a robust stance on national security, and follows the motto: ‘You scare the crap out of your adversaries.’
‘Without being Pollyannaish, idiotic or pretending like any country’s been perfect or there’s not injustice, at the margin, would you want a world where America is stronger, healthy and more powerful, or not?’ is one of his rhetorical questions.
Karp takes a similarly robust view on the investors who were short sellers of Palantir shares earlier this year, betting that their price will fall.
He simply observed that he loves to ‘burn’ those going short of his stock.
‘Almost nothing makes a human happier than taking the lines of cocaine away from these short sellers, who are going short on a truly great American company — not just ours — they just love pulling down great American companies so that they can pay for their coke.’
‘And the best thing that can happen to them is, we will provide — we will lead their coke dealers — to their homes, after they can’t pay their bills.’
Whether or not they are now besieged by irate drug dealers wanting to be paid, anyone who went short on Palantir earlier this year almost certainly lost money.
But some analysts are warning that anyone who jumps on board now could face a hazardous journey, arguing that the shares have risen too far too fast.
Brent Thill of broker Jefferies questions whether the growth estimates of 26pc this year and 24pc in 2025 are achievable.
This doubt seems to lie behind the decision by hedge funds, such as Ken Griffin’s Citadel, to sell their stakes in Palantir this year.
A few funds committed the cash to Nvidia instead. Most UK fund managers have yet to acquire stakes in the company, perhaps because it only joined the S&P 500 index in September.
This caution over Palantir’s prospects is reflected in analysts’ opinions: eight of the firms, including Goldman Sachs, that follow the stock consider the shares a ‘hold.
Three firms rate the shares a ‘buy’, perhaps believing that the company’s move to the Nasdaq tech-heavy index on November 26 will provide a boost. Exchange traded funds (ETFs) that follow this index will be compelled to buy the stock.
In advance of this move Dan Ives of the brokers Wedbush raised the target price for the shares to $75. Mariana Perez of Bank of America has set the same target, arguing that ‘Palantir is poised to dominate as companies turn to software and AI to increase their margins, rather than trying to achieve scale by investing in fixed assets.’
US retail investors seem to believe that Palantir will deliver the ‘tendies’ – online slang for share price gains.
UK investors may already have exposure to the AI revolution through stocks like Nvidia and Microsoft. Palantir could be an addition, provided that you can afford to watch and wait.
How to buy
You can buy and sell shares through online investment platforms such as AJ Bell, Bestinvest, Hargreaves Lansdown and Interactive Investor.
If you want to take a bet on a rise in defence spending, Palantir is the largest holding at the Han Future of Defence ETF. This fund puts money into companies that generating revenue from defence and cyber defence spending by Nato and Nato+ ally nations. The fund also has stake in BAE systems, the UK group.
