(News Bulletin 247) – Driven by the theme of artificial intelligence on Wall Street, Palantir has gained more than 350% since the start of the year. Which marks the biggest increase in the S&P 500.

Which group will see the biggest rise in the S&P 500 this year? If there are still two sessions left before the end of 2024, one company clearly stands out.

And it’s not Nvidia, which “only” ranks third with an increase of 172.5% since January 1st. This is Palantir Technologies, with a jump of more than 350%

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Palantir, between CIA and Lord of the Rings

Palantir only recently joined the S&P 500, last September. Which also contributed to accelerating the impressive stock market rally of this company, the market anticipating purchases of securities by funds replicating the major stock indices, such as the S&P 500. Palantir shares have gained around 160% since announcement of its inclusion in the most important barometer of the New York Stock Exchange.

The group’s stock market history began quite recently. Palantir went public in September 2020, at a price of $10 per share, and then had a market capitalization of around $20 billion. The stock is now trading above $78, and the capitalization has increased to around $187 billion.

Palantir was founded in 2003 by former Paypal employees including Alex Karp, its current CEO, as well as the famous and controversial Peter Thiel. Its name is also a reference to a legendary stone from Tolkien’s saga “The Lord of the Rings”.

Specializing in data analysis, particularly sensitive data, the company was initially funded by the CIA. The company develops, for example, software enabling anti-terrorist operations. These links with the American intelligence services and authorities – but not only that since the company has notably counted the DGSI among its clients – have sometimes led the group to be the subject of controversy. In the United Kingdom, petitions have demanded in 2023 that the NHS, the public health system, abandon its large contract with the group, accusing Palantir of espionage. The American company will defeat these attacks.

Although its contracts with governments initially constituted the bulk of its revenues, the company has well developed its “business” segment. This activity represented, in 2023, a billion dollars in turnover compared to 1.2 billion for the “government” segment.

(Much) more expensive than Nvidia

The stock market ride, however, has been bumpy. The stock had fallen below its introductory price in 2022-2023 and it especially took off this year

In 2024, Palantir has ridden the wave of artificial intelligence on the stock market, to the point of being nicknamed the “(Lionel, Editor’s note) Messi of AI” by Wedbush analyst Dan Ives.

Palantir notably launched its AIP platform helping its clients take advantage of artificial intelligence.

“Palantir is now positioned as a major player in the field of AI, with its AIP (Artificial Intelligence Platform) at the heart of its strategy. This allows its customers to operate large models securely and reliably Language Learning (LLM), thereby promoting faster and more efficient human decision-making,” explains IG Markets.

“Palantir’s strong performance is also attributed to the extensive customization of its services, which allows it to charge higher rates, with an operating margin reaching 35%,” the broker continues.

“We see Palantir as a key part of the safe and secure implementation of machine learning (ML), AI, and future data science capabilities (such as imminent quantum computing),” appreciated Bank of America in September.

Driven by its positioning in AI and cybersecurity, Palantir has experienced enviable growth. In the third quarter, revenues increased by 30% year-on-year, after an increase of 27% in the second. Since the fourth quarter of 2023, the group has generated a positive net result in each quarter.

The company also benefited from Donald Trump’s victory, with the market detecting links between the group’s management and the president-elect, with potential measures favorable to the development of AI, notes Bloomberg.

The fact remains that Palantir does not escape gravity. Analysts have become increasingly skeptical of its astronomical valuation, much more so than in the case of Nvidia. The “P/E”, that is to say the market capitalization divided by the expected profits over twelve months, an imperfect but widely used market indicator, amounts to 55 for Nvidia against 416 for Palantir.

“The AI ​​flame continues to burn, but the stock is overheating,” Morningstar wrote in November.