Can Palantir’s Stock Rise to Rival Microsoft?

Since its debut on the New York Stock Exchange in September 2020, Palantir Technologies has given investors a thrilling ride. Initially, the company wowed the markets with its bold claims of becoming the go-to operating system for data across the U.S. government. This promise, coupled with the fervour surrounding growth and meme stocks at the time, propelled Palantir’s shares from an opening price of $10 to a record high of $39 just a few months later. However, the excitement was short-lived as the stock tumbled to a low of $6 by December 2022, following a period of cooling growth and rising interest rates that rattled high-flying tech valuations.

Fast forward to 2024, and Palantir has made a remarkable recovery, with its stock quadrupling to around $26. This resurgence has been driven by a combination of renewed revenue growth and soaring profits, with the company now boasting a market cap of approximately $59 billion. But as Palantir continues to ride this wave of success, some investors are wondering: could it one day rival tech giants like Microsoft, whose stock (MSFT) is currently valued at a staggering $2.96 trillion?

To understand Palantir’s potential, it’s essential to examine its growth trajectory. The company’s platform, which aggregates data from diverse sources to support data-driven decision-making, serves both government and commercial clients. In 2023, government contracts accounted for 54% of Palantir’s revenue, with the remaining 46% coming from commercial businesses. Despite its initial rapid growth, Palantir faced significant headwinds in 2022 and 2023, with a noticeable slowdown in demand from both sectors. This deceleration led to tempered expectations for its long-term growth.

However, Palantir is now expecting a revenue increase of 23% to 24% in 2024, buoyed by the expanding artificial intelligence (AI) market and increasing geopolitical tensions that drive government spending on data mining services. The company’s recent success is also reflected in its latest quarterly results, where it reported revenue of $678 million, marking a 27% year-on-year increase, and non-GAAP earnings growth of 80%. This performance exceeded market expectations and led to a significant boost in its stock price.

One of the key drivers behind Palantir’s resurgence has been the rapid adoption of its Artificial Intelligence Platform (AIP) by commercial customers. As enterprises seek to integrate AI into their operations, Palantir has positioned itself as a crucial player in this burgeoning market. The company’s Chief Revenue Officer, Ryan Taylor, highlighted the massive opportunity within the AI ecosystem, noting that revenue expectations from AI infrastructure have grown from $200 billion to $600 billion per year in just nine months. This underscores the potential for Palantir to continue its upward trajectory.

While it’s still a long way from challenging the likes of Microsoft in terms of market capitalisation, Palantir’s recent achievements and strategic positioning in the AI space suggest it could be on the cusp of significant growth. For investors considering adding Palantir to their portfolios, the company’s recent performance and future prospects offer a compelling case.

For those tracking technology stocks, it’s clear that Microsoft stock (MSFT) remains a benchmark for success in the industry. However, Palantir’s ongoing developments in AI and data-driven technologies could make it a stock to watch closely in the coming years.

For more insights into Palantir’s performance and future prospects, visit the Palantir Investor Relations page.