For much of the past two years, big tech has dominated the storylines revolving around artificial intelligence (AI). "The Magnificent Seven" members Microsoft, Amazonand White head ChatGPT creator OpenAI has invested billions in its biggest competitor, Anthropic.
It's in between TeslaIt's the brainchild of Elon Musk, who aims to bring self-driving cars and humanoid robots to the masses. Of course, none of the AI applications being developed by these megacap tech enterprises would be possible without their help. Nvidiagraphics processing unit (GPU) and proprietary software.
If you've read any of my previous posts, you'll know that I tend to use November 30, 2022 as the start of the AI revolution. To add some context, this is the day ChatGPT went public. Since then, Nvidia has outperformed its Magnificent Seven peers by a long shot and is up more than 700 percent by the market close on December 12, 2024.
To put it bluntly, it's Nvidia's world, and everyone else lives in it. However, smart investors understand that they can match the performance of the greatest powerhouses. In addition to big technology, it is one company that has maintained its star status in the field of artificial intelligence Palantir Technologies(NASDAQ: PLTR).
Palantir has proven itself competitive with the world's enterprise software giants and some investors. billionaire entrepreneur Chamath Palihapitiya arguing that the company has yet to scale.
With so much potential on the horizon, could Palantir be the next Nvidia in sight? Let's dig in and find out.
During Palantir's third-quarter earnings call, CEO Alex Karp made an interesting statement about how data integration is the most important variable in the development of AI-powered services.
"Professors who write about these things seem to believe that the commodity, that is, the LLM, is its valuable aspect, and that real assets, which represent how the commodity is managed, are real values," Karp declares.
What Karp is trying to say here is that large language models (LLMs) are a commodity rather than a proprietary technology. But Alphabet's Gemini, Amazon's Claude, Meta's Llama and ChatGPT both offer unique features, and the average user can't really tell the difference between these platforms. From Karp's point of view, the real value proposition is how to bring data into LLM by supporting software integration. This is where he believes Palantir has an advantage.
In April 2023, Palantir released its fourth major product, the Artificial Intelligence Platform (AIP). In the table below, I've included a few key metrics that show the impact AIP is having on Palantir.
Metric
Q3 2023
Q4 2023
Q1 2024
Q2 2024
Q3 2024
Revenue Growth (% YoY)
17%
20%
21%
27%
30%
Number of users
453
497
554
593
629
Adjusted gross profit
82%
84%
83%
83%
82%
Adjusted free cash flow
140.8 million dollars
304.7 million dollars
148.6 million dollars
148.7 million dollars
434.5 million dollars
Source of information: Palantir Investor Relations.
The creation of AIP changed Palantir. Growth in the company's client list led to accelerated revenue each quarter, and margins remained at normal levels. The combination of revenue growth and strong margins provides Palantir with sustainable financial flexibility.
By all accounts, Palantir looks unstoppable. However, despite this impressive performance, there are additional analyzes that need to be discussed before the company can be labeled as having Nvidia-like capabilities.
Image source: Getty Images.
When comparing a company to Nvidia, there's more to it than valuation and stock price.
Nvidia's emergence as the biggest player in artificial intelligence isn't just about GPUs and computing networks. It actually is how that business really works. Nvidia's hardware (i.e., GPU) is tightly coupled with the Compute Unified Device Architecture (CUDA) software platform.
Nvidia's GPU deployment on CUDA essentially creates a "lock-in" effect for its customers, essentially owning the AI stack within its customer ecosystem. This dynamic has helped Nvidia capture nearly 90% of the market for fully-capable AI inference and training protocols.
Furthermore, with more than $1 trillion planned to spend on AI infrastructure over the next three years, Nvidia's strong grasp of the market should allow it to continue to gain market share, making growth even more profitable.
When it comes to enterprise software, I can't say that Palantir is on par with Nvidia. In my eyes, GPUs and data centers are essential for the development of artificial intelligence. In contrast, software and data analytics are more in the "good to have" bucket.
Despite its importance in data processing and making the LLM more useful, I doubt whether enterprise software is really necessary. Moreover, there is fierce competition among people SnowflakesWith Databricks and many others, I think Palantir may struggle to create the same "lock-in" dynamic that Nvidia was able to.
While I admire Palantir's leadership and am proud to own the stock myself, I can't say the company is going to be the next Nvidia.
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John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of The Motley Fool magazine's board of directors. Alphabet CEO Suzanne Frey is a member of The Motley Fool's board of directors. Randy Zuckerberg, former director of market development, Facebook spokeswoman and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool magazine's board of directors. Adam Spatacco He has held positions at Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends companies such as Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, Snowflake and Tesla. The Motley Fool recommends the following options: long $395 calls on Microsoft in January 2026 and short $405 calls in January 2026 on Microsoft. The Motley Fool has it disclosure policy.
