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The best-performing stock on the S&P 500 this year is not Nvidia or Tesla, but Palantir Technologies, another obscure name benefiting from the artificial intelligence gold rush, controlled by an eccentric billionaire. A hungry defense contractor. Alex Karp.
Palantir stock’s rise in 2024 coincided with the AI boom.
AFP (via Getty Images)
important facts
Palantir is the S&P’s best-performing stock in 2024, with a year-to-date return of 369% through Monday.
Palantir only joined S&P in September, the most commonly cited U.S. stock market benchmark covering the 500 most valuable companies across industries, but much of the company’s gains have come in the past three months. This is what was obtained.
In addition to the shock from broader Wall Street enthusiasm for AI’s name, Palantir stock has enjoyed a significant rally on optimism about increased defense spending under the incoming Trump administration, with Palantir stock enjoying a significant boost since Election Day. The stock rose 58%.
S&P’s 166% gain since the announcement is arguably the strongest return of any S&P company over the same period, according to FactSet.
Palantir’s rise increased its market capitalization from $37 billion to about $180 billion, a ninefold increase from the $20 billion valuation it received in its 2020 initial public offering.
Nvidia is the most profitable S&P component listed on the index throughout the year, as the primary architect of semiconductor technology that improves advances in generative AI by 172%.
tangent
Palantir is the third best-performing stock in 2024 among publicly traded companies worth at least $50 billion, regardless of S&P status, leading to marketing software company Applovin (up 756%) and Bitcoin holding company MicroStrategy (up 756%). 477%).
What does Palantir do?
Palantir uses AI-powered analytics to deliver solutions to large amounts of data. Bank of America analyst Mariana Pérez Mora said in a note to clients earlier this year that the company is seeing “rapidly increasing demand for artificial intelligence (AI) platforms in both commercial and government end markets. I am benefiting from it,” he said. Palantir is perhaps best known for its work as a contractor for the Department of Defense, but its clients also include General Mills and United Airlines. Government contracts accounted for $408 million of Palantir’s third-quarter revenue of $726 million.
amazing facts
It may seem strange that a company worth more than $150 billion has quarterly sales of less than $1 billion, but there’s a good reason for that. Palantir is by far the most expensive stock in the S&P based on price-sales ratio, a measure that compares a company’s trailing 12-month sales to its market value. Palantir’s price per sales of 67 times is 37 times that of the next closest company, Texas real estate giant Texas Pacific Land Corporation, and more than 20 times higher than S&P Media’s price per sales of 3 times. However, Palantir’s “dominant position” in the AI-powered software market…should support revenue growth and improved margins,” predicts Perez-Mora.
Contra
Palantir, a Wall Street favorite for its high profit margins and best-in-class technology, is not without controversy. The company came under fire from human rights groups ahead of its IPO over its involvement with Immigration and Customs Enforcement, which said Palantir’s data was linked to raids on people living in the U.S. illegally. Karp said in 2020 that his company’s analysis helped ICE find “undocumented people in our country,” adding, “We need to understand what’s happening at our borders, how it’s happening, and… how enforcement is being done.” He added that he sympathizes with “legitimate concerns about whether or not this is the case.” ”
Forbes rating
Karp, co-founder and CEO of Palantir, is worth about $7.5 billion, making him one of the 400 richest people in the world. Another co-founder, Peter Thiel, is worth $15 billion, making him the 148th richest person, while two other co-founders, Stephen Cohen and Joe Lonsdale, officially made their billions last month. He has joined the ranks of the wealthy.
tangent
Mr. Karp describes himself as a believer in “populist left-wing politics” and supported Vice President Kamala Harris in the November election, but co-founders Lonsdale and Thiel are among the most prominent funders of right-wing politics. He is one of the people. Lonsdale was hailed as a “daddy’s house” after Donald Trump’s victory in November, but Thiel has donated tens of millions of dollars to Republican causes over the past decade. At Palantir, “Peter’s support for Trump actually made it more difficult to get things done,” Karp told the New York Times this summer, when Thiel publicly endorsed Trump in 2016. (Mr. Thiel did not endorse any candidates this term).
important quotes
During a discussion at a JPMorgan Chase event earlier this month, Karp told hedge fund billionaire Stanley Druckenmiller about Palantir’s close-knit culture, saying, “This is a company with no sex and no drugs.” “It’s a rare cult that’s rarely used, and we’re not poisoning anyone.”
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