One of the most controversial topics of conversation culturally speaking is without a doubt the use of artificial intelligence. However, one aspect of the conversation that we’re just now beginning to hear about is the financial impact this technology could have on our economy and the market in general. Market watchers were caught off guard with the advent of AI technology, being especially shocked at how fast it changed the views among some of the world’s most valuable companies.
Take, for example, how Apple lost its top position to Microsoft, who is now ruling and reigning in the tech world with a cap of over $3 trillion. Read that number again. One more time for good measure. That’s hefty, wouldn’t you agree? Nvidia also shot up the charts to snag the number 3 slot right behind Apple with a massive market cap of $2.3 trillion. What led to its great success? They company’s popular gold-standard AI chips. Companies such as Amazon, Alphabet, and Meta Platforms have also joined their colleagues at the top of the dog pile with their AI solutions.
According to The Motley Fool:
With Palantir Technologies‘ (PLTR -6.12%)market cap of just $54 billion (as of this writing), it might seem like a longshot to suggest that it is vying for membership in the $1 trillion club. However, the accelerating demand for AI and the company’s expertise in the field suggest the odds are likely in Palantir’s favor.
It wasn’t very long ago that Palantir was relatively unknown outside of government agency circles. The data mining and AI specialist worked closely with the intelligence community in the U.S. to ferret out terrorists and prevent attacks before they happened. Palantir soon expanded beyond its original mandate, creating sophisticated built-to-order AI models for other government agencies and enterprises, helping discover valuable insights hidden deep within their data.
Palantir sprung into action when the market for generative AI exploded early last year, putting decades of expertise to work and developing a solution that could be broadly applied. The fruit of those labors is the Artificial Intelligence Platform (AIP), the company’s home-grown generative AI system, which Palantir developed in a matter of months. However, it’s the company’s go-to-market strategy that is spurring the greatest demand.
In order to capitalize on the opportunity, Palantir is now holding “boot camps.”
“These immersive, hands-on-keyboard sessions allow new and existing customers to build live alongside Palantir engineers, all working toward the common goal of deploying AI in operations,” the company’s management team stated in its fourth-quarter business update.
The number of individuals who are attending these sessions has been astronomical. AI technology is helping businesses learn how to solve business issues they’ve had for years and is also assisting in improving productivity in the workplace, making their staff more efficient. Efficiency saves a lot of cash when it comes to the cost of doing business, and that means companies can expand and create new jobs for the economy. It’s a pretty big win.
Last October, Palantir revealed its plans for a whopping 500 boot camps or the year, but somehow managed to exceed that goal by doing over 560 of them for a total of 465 organizations in a time period of only four months. That is insane.
That strong and growing demand is driving robust financial results. In the fourth quarter, Palantir’s revenue of $608 million climbed 20% year over year and 9% sequentially. The biggest contributor was U.S. commercial revenue, which surged 70%, driven by demand for AIP. Palantir delivered its fifth consecutive quarter of profitability, making it eligible to join the S&P 500 index, which some market watchers believe that will happen this year.
It was management’s outlook that really turned heads, as the company is forecasting at least 40% growth for the U.S. commercial segment — which includes AIP — over the coming year.
Palantir is in a unique position among AI providers. The company has a long history of AI expertise and a solid track record of fulfilling government contracts. That gives Palantir an edge in providing AI solutions to the U.S. government and its allies, and many believe the quest for sovereign AI among nations has already begun. Add to that the vast potential within enterprise businesses and the opportunity becomes clear — but it won’t happen overnight.
Wall Street have revealed that Palantir is all set to make $2.71 billion in 2024 and that will shoot up to $3.23 billion the following year, which then gives the company a price-to-sales ratio of 16. Assuming that ratio remains steady, the company would have to then increase revenue to almost $60 billion yearly in order to support a $1 trillion market cap.
Palantir’s revenue grew by 20 percent year over year during the most recent quarter. If that rate continues, it will take the company around 16 years to reach the $1 trillion threshold.
“However, its U.S. commercial business — fueled by generative AI — grew by 70% in Q4, and management is guiding for at least 40% growth for the segment, so it could soon eclipse its other sales. Palantir has a tendency to under promise and over-deliver, so that estimate could well be conservative. If the company grew its revenue closer to 40%, it could be worth $1 trillion or more within a decade,” the Motley Fool reported.
Estimations coming out regarding regenerative AI are growing exponentially, however, it’s now being estimated the market will be worth between $2.6 trillion and $4.4 trillion annually, says global management consulting firm McKinsey & Company.
If Palantir is able to get even a small part of that very large and still growing opportunity, we’ll see them hit the $1 trillion mark in no time.