Palantir: The Oracle of the AI Age, but Priced Like It’s 1999

Summary

Palantir is at the center of a paradigm shift in enterprise architecture and national security infrastructure. With platforms like Foundry and AIP, it is reshaping how data is structured, acted upon, and defended. Much like Oracle in the 1980s, Palantir has built foundational infrastructure for a new computing era—one where AI agents act on structured objects, not static databases. The company’s strong growth, AI narrative, and government ties make it one of the most important software companies in the world today. However, at a forward P/E of over 200x and a $330 billion market cap, the valuation leaves little room for error. Despite the excitement and structural advantage, the risk/reward at current levels appears skewed. This is a HOLD.

Thesis

1. A Foundational Shift: Containerisation of Thought Palantir’s architecture is years ahead of competitors in terms of preparing for the AI age. In the same way that the containerisation of shipping transformed global trade, Palantir’s approach—converting enterprise data into objects—transforms how information flows inside organizations. Their Foundry platform enables semantic layering of data, allowing AI agents to act on objects like “flights” or “supply chains” instead of SQL tables. This creates a kinetic, dynamic, and AI-native infrastructure. In this sense, Palantir didn’t just build an enterprise SaaS tool; it built the operating system for AI-powered enterprise transformation. The analogy to Oracle is strong—both built something foundational during moments of architectural upheaval. The difference is that Palantir may have been earlier and more controversial in doing so. 2. Palantir AIP: AI in Production, Not Just Demos Palantir’s Artificial Intelligence Platform (AIP) integrates LLMs like GPT-4 directly into enterprise workflows. Unlike typical AI demos that live in chatbots, AIP places AI in decision-critical paths: supply chain optimization, battlefield tactics, fraud detection. Hundreds of client bootcamps have already stress-tested AIP. This is real AI deployment, not a science fair. Importantly, Palantir’s tools allow AI to be used securely within regulatory and defense environments. That’s a massive moat. While others struggle to comply, Palantir is battle-tested. 3. Dual Flywheels: Government and Commercial Palantir grew up with defense contracts, particularly through Gotham. But now its commercial flywheel is spinning fast. U.S. commercial revenue rose 33% YoY in Q1 2025, and operating margins are expanding with scale. These are not early-stage metrics; this is a $4 billion in revenues run-rate company turning profitable. Unlike many SaaS firms, Palantir is embedded. It doesn’t just sell software—it transforms operational architecture. That stickiness makes growth more resilient and upselling more powerful. 4. A Mission, Not Just a Product Palantir positions itself not only as a tech company but as a bulwark of Western civilization. CEO Alex Karp’s unapologetic tone and Peter Thiel’s philosophy draw ideological lines in the sand. This has made Palantir controversial, especially with ESG funds and progressive institutions—but also attractive to those who believe tech should reinforce national strength.

Risks

1. Valuation Stretch: History Rhymes Palantir trades at a forward P/E over 200x—pricing in nearly flawless execution over many years. Even Oracle, during its own paradigm shift, traded at similar levels in 1999 and then fell from $40 to $9 despite strong earnings growth. Valuation resets can be brutal, even when the long-term thesis is correct. With $2 billion in projected free cash flow and a $330 billion market cap, investors are paying 165x FCF. That’s hard to defend outside of hyper-growth mode. 2. Political and Reputational Risk Palantir’s close ties to defense, intelligence, and controversial figures like Peter Thiel make it a political lightning rod. ESG funds, anti-defense investors, and progressives often exclude the company outright. That exclusion may limit broader institutional adoption or cause headline risk in politically charged moments. 3. Competitive Response While Palantir is far ahead in operational AI, competitors like Snowflake, Databricks, and Microsoft will not sit still. As LLM infrastructure becomes more modular, Palantir’s end-to-end integration could become less differentiated. If open-source LLM stacks evolve rapidly, Palantir may have to defend its moat more actively. 4. Revenue Concentration and Cyclicality Government contracts still drive a significant portion of revenue. While Palantir is expanding commercially, delays in defense spending or political transitions could impact top-line growth. It is not yet a fully diversified enterprise software company.

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Tags

• AI
• Technology
• Software