7 months ago
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Since its initial public offering in late 2020, Palantir Technologies (NYSE: PLTR) has been one of the most polarizing stocks on Wall Street. Jim Cramer recently referred to it as a "meme stock," and last year, an online publisher of short reports labeled it an "AI imposter."
Although its work with the U.S. military and intelligence agencies can cause Palantir to come across as elusive or secretive, I would argue that the negative sentiment surrounding the company is rooted in a misunderstanding of its business and value proposition. Simply put, Palantir is not your run-of-the-mill enterprise software company.
With its shares up by 145% during the past 12 months and the company's induction on Sept. 23 into the S&P 500, it's getting harder to buy the bearish narrative on Palantir. It has emerged as a darling of the artificial intelligence (AI) revolution, its partnerships with tech giants suggest that it's a legitimate player, and it appears that its next phase of growth is just beginning.
I see fintech platform SoFi Technologies (NASDAQ: SOFI) in much the same way as Palantir, and I think its stock could follow a similar trajectory to the one Palantir took, making it a potentially lucrative buying opportunity right now.
Palantir's trip down memory lane
When it went public, Palantir's private-sector business was a relatively small part of its operation, and skeptics labeled the company a glorified government contractor. On top of that, 2022 was a brutal year in the stock market, and technology stocks in particular took a big hit. Two key features of the macroeconomic environment that year were abnormally high inflation and an aggressive shift in monetary policy featuring rising interest rates.
It didn't take long for businesses to rein in their spending and tighten up their financial controls. As budgets shrank, so did sales of pricey software products such as cloud computing and AI analytics tools.
This took a toll on Palantir -- and many of its cohorts -- and its growth slowed dramatically. At the end of December 2022, Palantir stock hit an all-time low of just $6.
Not even two years later, its share price is now up more than sixfold from that nadir. What happened?
From a macro standpoint, interest in AI really started to take off in 2023, which reignited software spending.
From a company-specific standpoint, it released its fourth major product in April 2023: the Palantir Artificial Intelligence Platform (AIP). During the past year, AIP has served as a major catalyst and has helped the company really penetrate the private sector.
