Palantir Stock: Company Says American AI Revolution Underway As Europe Hesitates – Investor’s Business Daily

author
5 minutes, 2 seconds Read

Data analytics software maker Palantir Technologies (PLTR) may indeed see upside from its push into “generative” artificial intelligence. But early signs are that whatever new revenue growth Palantir stock sees from generative AI, it’ll be from U.S. customers, not Europe.




X



Palantir gets roughly 18.5% of revenue from Europe, according to FactSet estimates. So it’s an important market to watch for the maker of surveillance software. In fact, the European Union has moved much faster than the U.S. in regulating artificial intelligence.

The EU’s Artificial Intelligence Act, passed in December, demands transparency and imposes requirements on companies designing, and/or using AI. Companies that make AI tools will need to provide regulators with proof of risk assessments and breakdowns of what data was used to train AI systems. Companies face heavy fines for breaching rules.

But Europe’s AI Act still needs to go through a few more approvals before taking effect. Among the concerns that led to regulation: job losses from automation, spreading misinformation online, “deepfake” imagery and cybersecurity.

And Europe has been a problematic market for Palantir. Parts of Germany, for example, have banned police use of its automated data analysis software amid privacy concerns.

It’s a touchy subject for Palantir Chief Executive Alex Karp. He said at a recent conference that Palantir software has helped prevent a return to fascism in Europe as well as terror attacks.

“I love when I’m getting yelled at in cities in Europe. I’m like, keep yelling at me. The only reason why someone’s not goose-stepping between me and you is my product,” Karp said.

Palantir Stock: Two Decades Of Using AI

Founded in 2003, Palantir has employed predictive AI and its pattern recognition capabilities for government agencies for two decades. Customers use Palantir software for intelligence gathering, counterterrorism and military purposes.

Meanwhile, Palantir’s AI-related business morphed into a different proposition after startup OpenAI launched generative AI and chatbot technology in late 2022. With user prompts, generative AI creates text, images, video and computer programming code from proprietary data.

In early 2023, Palantir rolled out its “Artificial Intelligence Platform” — new products integrating generative AI training models with its legacy software.

By the end of 2023, Palantir said it had completed over 560 “boot camps” with some 300 organizations. The boot camps aim at getting companies on a fast track to launch generative AI pilots/projects across health care, telecom, insurance, car rental, finance, pharma, manufacturing and other uses.

Problem is, while U.S. companies apparently jumped on the boot camp opportunity, Palantir had less success in Europe.

“What America has obviously realized is this is real,” said Karp on the software maker’s fourth quarter earnings call with analysts.

He added: “Europe has decided that they are not going to engage in this revolution.”

Palantir Stock: Revenue Growth Slows

In 2023, FactSet estimates that Palantir reaped over 10% of sales from the U.K., 7% from China, and under 2% from Germany and Japan. Palantir hasn’t discussed its China business in regulatory filings.

palantir revenueA FactSet spokesperson said the China estimate was based on proprietary algorithms.

In 2023, Palantir garnered 62% of revenue from the U.S. and 38% from international customers — government and commercial.

Palantir launched its initial public offering in late 2020. In 2020, revenue rose 47%. It climbed 40% in 2021.

Palantir’s 2023 revenue growth slowed to 17% from 24% in 2022. In 2023, U.S. revenue grew 32%, the same as a year earlier, while non-U.S. revenue grew 14% compared with 29% in 2022.

Most Job Cuts Overseas

Palantir had two rounds of workforce reductions last year. According to a recent Jefferies report, most job cuts by Palantir in 2023 impacted employees overseas. Jefferies estimates that Palantir had 35% of employees outside the U.S. at the end of 2023, down from 37% a year earlier.

For investors looking at revenue growth for Palantir stock, the U.S. commercial market and artificial intelligence are key.

“Palantir’s Artificial Intelligence Platform is still in its infancy and already contributing in a meaningful way,” Bank of America analyst Mariana Mora said in a recent note to clients.

Palantir has forecast a slight reacceleration in revenue growth to 19.5% to $2.66 billion in 2024. The company has forecast commercial revenue growth of 40% in the U.S.

Palantir salesHowever, Palantir has not disclosed pricing for generative AI products. And, not many customers have moved from pilot programs to actual product deployments.

Revenue To Reaccelerate?

In 2023, commercial customers accounted for 45% of revenue, up from 40%. While Palantir aims to grow its AI-related commercial business, older, “predictive” AI is a big part of Palantir’s business. For example, Palantir was one of the early contractors for Project Maven. Launched in 2017, Project Maven is part of the U.S. Army’s effort to bring AI to the battlefield.

In 2022, the U.S. Army Research Lab awarded Palantir a $229 million contract for AI development services. In addition, Palantir holds a $32 million contract for Project Maven software to analyze drone imagery.

Meanwhile, Palantir announced March 6 that it has won a new, $178 million U.S. Army contract for its Tactical Intelligence Targeting Access Node, or TITAN project, a battlefield system using artificial intelligence. TITAN is geared to aggregate data from space and terrestrial sensors for long-range precision targeting and other battlefield planning.

Technical Ratings: How The Company Stands Up

Palantir shares have gained 39% thus far in 2024 after surging 167% last year.

palantir technologiesAlso, Palantir stock holds a Composite Rating of 99 out of a best-possible 99, according to IBD Stock Checkup.

IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.

Palantir stock holds an Accumulation/Distribution Rating of A-minus. Further, that rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ signifies heavy institutional buying; E means heavy selling. Think of a C grade as neutral.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on 5G wireless, artificial intelligence, cybersecurity and cloud computing.

YOU MAY ALSO LIKE:

IBD Digital: Unlock IBD’s Premium Stock Lists, Tools And Analysis Today

Learn How To Time The Market With IBD’s ETF Market Strategy

IBD Live: A New Tool For Daily Stock Market Analysis

Want To Get Quick Profits And Avoid Big Losses? Try SwingTrader

This post was originally published on this site

Similar Posts