r/valueinvesting
The more I follow Palantir, the less I think it's just an AI software company.
Author sees PLTR evolving into an enterprise AI OS, not just a defense contractor, despite high valuation and government reliance risks.
- Evolving from a defense contractor into a comprehensive operating system for data-driven organizational decision-making.
- Commercial business accelerating via AIP, focusing on practical AI deployment rather than just selling foundational models.
- Unique positioning in the AI ecosystem as the integration layer between foundation models and enterprise data/workflows.
- Extremely high expectations and valuation priced for years of near-perfect execution.
- Significant reliance on government contracts, exposing the company to political and ethical scrutiny.
A few years ago I would've described Palantir as a defense contractor with great software. Now I'm not so sure. It feels like it's evolving into an operating system for organizations that need to make decisions from massive amounts of data.
The government side is still a huge part of the story, and that's probably not changing anytime soon. Defense, intelligence, logistics, battlefield software... those businesses continue to grow. But what caught my attention recently is how much the commercial side has accelerated with AIP. U.S. commercial growth has been extraordinary, customer counts keep climbing, and management keeps talking less about selling AI models and more about helping companies actually deploy AI into real operations. That seems like an important distinction.
I also think Palantir occupies an unusual position in the AI ecosystem. Companies like OpenAI, Anthropic and Google build foundation models. Palantir isn't really trying to compete with them. Instead, it's trying to become the layer that helps governments and enterprises integrate those models with their own data, workflows and decision-making. If that's the future of enterprise AI, it's a pretty interesting place to sit.
The obvious risk is that expectations are now incredibly high. The company has been putting up exceptional numbers, but the stock is priced like investors expect years of near-perfect execution. There's also the reality that a meaningful portion of the business still depends on government contracts, and the company continues to attract political and ethical scrutiny because of the customers it serves.
Maybe that's why I find PLTR such a fascinating company. I'm less interested in whether it's "expensive" today than in whether it ends up becoming an indispensable enterprise AI platform or simply remains an exceptional defense software company.
Curious how others see the business.
Sure but have you seen the price of Palantir? There are many companies that can help organizations operate with their data, including snowflake, databricks, and increasingly Claude.
This post basically echos what I think of palantir. Recently have become very bullish after not really grasping the thesis for a long time. Because of the valuation I’m sure this sub will be anti.
I think that's exactly why Palantir is such an interesting stock. The business and the valuation have almost become two separate discussions. Even people who are bullish on the company often admit the multiple is demanding. The commercial execution has started to catch up with the narrative, which is why I think more people are finally understanding the thesis instead of viewing it as just another defense contractor.
love me some AI slop in the morning
yumyum
Oil companies aren't like tech companies.
They don't depend on equity prices on the secondary market for financing or employee compensation, because they generate heaps of operating cash flow. If they need financing they'll mostly use revolving credit facilities or issue bonds. Little of their workforce gets SBC. This is why share buyer boycotts hardly effect their operations.
Essentially, if one's investing in the secondary equity market for oil companies, and not participating in banking for them, with every dividend payment or share buyback, one's extracting money from that's sectors' financial ecosystem. One can spend the proceeds on solar, BEVs, heat-pumps or donations to Greenpeace. Want to hurt the oil companies? Figure out how to get the world to stop buying their product.
Palantir, like many tech companies, would be a money losing operation without the stock market subsidizing their operations via SBC. They claim 0.84% earnings yield, but they diluted existing shareholders by -3.24% over the last year. Shareholders are getting diluted faster than retained earnings are increasing.
And yet you're still profiting off an oil company that extracts oil and sells it. What about Palantir supplying software to Ukraine to defend themselves from Russia? The point I'm trying to make is that if you're going to let politics get in the way of your investing, then it's a slippery slope, unless you come up with some mental gymnastics like you have done.
r/ValueInvesting
looks inside
Palantir
That's actually one of the things I find most interesting about Palantir. The AI models themselves are becoming more commoditized, but building an ontology that maps how an organization actually operates is a much harder problem. Once that layer is embedded into day-to-day operations, switching costs can get pretty high. I agree Databricks is probably one of the closer commercial competitors, but Palantir's years of work with defense and complex government organizations seem to give it a pretty unique head start in those environments.
Lots of smart asses working there. Unfortunately a lot of assholes too. Won't buy, even if their engineering is top. Oh, and the valuation is an issue too. But other companies should notice and get inspired.
Palantir's moat is basically all the regulation compliance across all regulated industries. Many financial banks, healthcare, utilities, military, and government divisions use Palantir software.
AIP is basically the gatekeeper shim layer that sits between the organization's data (system of record) and the LLM. It controls which data the LLM can see, so it does not leak secrets. This is important for regulated industries.
For commercial, the typical company that adopts Palantir are logistics companies and large supply chain. Think of stuff like agriculture, ranching, construction, semiconductors, etc. Samsung Electronics uses Palantir for example. The ontology or digital twin of tracking a logistics chain is the value they provide.
Palantir deploys FDE (forward deployed engineers) so that even non-tech companies with small IT depart ents can get started with their software. Typically you would think that would be a low margin consultantcy like Accenture, however the margins are high like a software company (gross margins of 80 percent).
In terms of balance sheet, they are asset light and have zero debt. The knock against Palantir has always been stock based compensation, but that has come down a lot over the last few years.
The negative of Palantir is the political overhang. Anti-American sentiment hits Palantir hard from activist groups and NGOs because Palantir is unapologetically pro-American. If you browse Reddit, Y! Combinator Hacker News or left wing social media, you will see lots of negative rhetoric against Palantir. The current CEO and President of Y! Combinator, Garry Tan was one of the first employees of Palantir. Tan gets lots of hate on Hacker News and Twitter from activist posters.
Peter Thiel was one of the founders. Thiel is a decisive figure on social media. However even left-wing mega billionaires like George Soros was one of the early investors in Palantir.
Valuations are premium, but early retail investors from 2020-2021 invested in Palantir because of the high quality business model.
I think that's a pretty fair summary. The thing I'd add is that Palantir's moat isn't just the AI models, those are becoming increasingly interchangeable. It's the combination of the ontology, governance, security, compliance and deep integration into mission-critical workflows. Once a large organization builds operations around that, switching becomes a much bigger decision than just replacing an LLM. The premium valuation is really the market betting that those switching costs and commercial adoption keep compounding. The execution has been impressive so far, but the expectations are undeniably high too.
NO, only forced automatic purchase of pension fund shares by my employer as they offer no alternative, but I sell and cleanse that crap every few months and get the funds transferred over to my SIPP to buy proper stock picks.
You are on a roll
Stupid response
Technically it's a question, albeit a rhetorical one