For most of the past two years, the story around artificial intelligence has been dominated by big tech companies. “The Magnificent Seven“Members Microsoft, Amazonand alphabet It has invested billions in the likes of ChatGPT creator OpenAI and perhaps its biggest competitor, Anthropic.
And at the same time there Teslathe brainchild of Elon Musk who is looking to bring self-driving cars and humanoid robots to the masses. Of course, none of the generative AI applications developed by these giant tech companies would be possible without help NvidiaGraphics processing units (GPUs) and proprietary software.
If you’ve read any of my previous articles, you’ll know that I tend to use November 30, 2022 as the starting point for the AI revolution. To add some context, this is the day ChatGPT was released to the public. Since then, Nvidia has outperformed each of its Magnificent Seven peers by a wide margin – gaining more than 700% as of market close on December 12, 2024.
Honestly, this is Nvidia’s world and everyone else lives in it. However, smart investors realize that the performance of even the greatest giants can be matched. Outside of big tech, there is one company that has maintained its star status in the world of artificial intelligence Palantir Technologies(NASDAQ:PLTR).
Palantir has proven that it can compete with the big companies in the world of enterprise software, and some investors such as… Billionaire businessman Chamath Palihapitiya He argues that the company hasn’t even started expanding yet.
With so much potential on the horizon, could Palantir be the next Nvidia hiding in plain sight? Let’s dig in and find out.
During Palantir’s Q3 earnings call, CEO Alex Karp made an interesting statement regarding how data integration is the most important variable when developing AI-powered services.
“The experts who write about these things seem to think that the commodity, i.e. the MBA, is the valuable aspect of this and that the actual asset, i.e. how the commodity is managed, is the actual value,” Karp declared.
What Karp is trying to say here is that large language models (LLMs) are more of a commodity than a proprietary technology. While Gemini Alphabet, Claude the Amazon, deadBoth Llama and ChatGPT offer unique features, and the average user cannot tell the difference between these platforms. From Karp’s perspective, the real value proposition is how to bring data into the MBA by supporting software integrations. This is where he believes Palantir has an advantage.
In April 2023, Palantir released its fourth major product called Artificial Intelligence Platform (AIP). In the table below, I’ve included a number of KPIs that illustrate the impact of AIP on Palantir.
metric
Third quarter 2023
Fourth quarter 2023
First quarter 2024
Q2 2024
Third quarter 2024
Revenue growth (% YoY)
17%
20%
21%
27%
30%
Number of clients
453
497
554
593
629
Adjusted gross profit margin
82%
84%
83%
83%
82%
Adjusting free cash flow
$140.8 million
$304.7 million
$148.6 million
$148.7 million
$434.5 million
Data source: Palantir Investor Relations.
The emergence of AIP has been transformative for Palantir. Growth in the company’s client list results in revenue accelerating each quarter while profit margins have maintained a healthy level. The combination of revenue growth and strong margins provides Palantir with strong financial flexibility in the form of consistent free cash flow.
By all accounts, Palantir appears unstoppable. However, despite this impressive performance, there is more analysis to discuss before classifying the company as one with similar potential to Nvidia.
Image source: Getty Images.
When comparing a company to Nvidia, there’s more to the equation than just valuation and stock price.
Nvidia’s emergence as the biggest player in AI isn’t just due to its GPUs and computer networking business. It actually is how This one really works. Nvidia’s hardware (i.e. GPUs) is closely integrated with its Compute Unified Device Architecture (CUDA) software platform.
The combination of layering Nvidia’s GPUs on top of CUDA has created a “lock-in” effect with its customers – essentially owning the AI stack within its customers’ ecosystems. It’s this dynamic that has helped Nvidia gain an estimated 90% market share — absolutely owning its AI training and inference protocols.
Moreover, with more than $1 trillion expected to be spent on AI infrastructure over the next three years, Nvidia’s tight grip on the market puts it in a position to continue to gain increasing market share, making its rise even more lucrative.
When it comes to enterprise software, I can’t say that Palantir has capabilities commensurate with Nvidia’s. In my view, GPUs and data centers are “must-have” elements for the development of generative AI. By contrast, software and data analytics are more important in the “nice to have” group.
Despite its importance in processing data and making an MBA more useful, I wonder if enterprise software is really indispensable. Moreover, with intense competition from the likes of SnowflakeDatabricks and many others, I think Palantir may struggle to create a similar “lock-in” dynamic like Nvidia has been able to do.
As much as I admire Palantir’s management and am proud to own shares myself, I can’t say the company will become the next Nvidia.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Spatacco He holds positions at Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, Snowflake, and Tesla. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has Disclosure policy.
