Palantir (NYSE: PLTR) is civilized with inclusion into S&P 500, but civil it is not

Palantir Technologies (NYSE: PLTR)—a data analytics firm known for its secretive work with US intelligence agencies—has been growing quickly by expanding to serve commercial clients and just took a major step toward the mainstream by being included in the flagship S&P 500 index. Anyone who thinks that means the company could be getting soft need only listen to recent comments from CEO and co-founder Alex Karp, because it’s still going for the literal kill. 

In a letter to shareholders last month, the outspoken CEO outlined the company’s bold strategy and reaffirmed the commitment to its number one client despite a push into more commercial endeavors. Karp noted that trailing twelve-month revenue from its US government business had surpassed $1 billion for the first time, and he made a case for a so-called “American dynamism” that connects the interests of the country’s public and private sectors in a world full of enemies.  

“The strength and dominance of the US military must be preserved and defended,” he said, adding that the company wants to use its expertise to help American companies and allied countries deploy artificial intelligence systems to go “beyond the merely performative and academic.” “The terrain for every institution in the world that seeks to survive has shifted as a result of the arrival of large language models and their capabilities,” he said.

At the heart of a transformation Karp says will eventually 10X the size of the company is a new AI platform capable of making the US and its Western allies “the dominant force again in this world.” It’s already showing early success, and the company saw revenue surge 27% in the last quarter to $678 million with government clients accounting for 55% of the total. Commercial sales are growing at the fastest pace, surging 33% in the second quarter.

“If you want to really kill your adversary on the battlefield, or change the economics of your business, you need a way of processing the raw resources,” Karp said on CNBC earlier this week, explaining the success Palantir has had in developing products that allow its customers to make use of the data being turned out by new AI products.

“Large language models are like hydrocarbons in the ground,” Karp explained. “They need to be processed. If you’re going to do something beyond chat, something that is crucial for the business, like bringing hydrocarbons out of the ground, or actually, in the case of the government context, monitoring troops, figuring out how to kill your adversary while staying alive, that raw knowledge has to be processed and put in your system.”

Whether facing physical or cyber attacks on the battlefield or over corporate networks, Karp said it was important to be thinking about defense. Customers, whether corporate or government, should be talking less and acting more, he said, stating that “if you want to stop interference, either kinetic or physical, you have to impose a price, and that price has to be significant and clear.”

Chief Revenue Officer Ryan Taylor, meanwhile, says the company has the opportunity to tap into a market worth $600 billion and help companies leap from merely developing AI prototypes to using them to make real-world decisions, from deciding who is creditworthy to creating maintenance plans for telecommunications lines. He highlighted new deals with Tampa General—a large hospital in Florida—and Panasonic Energy of North America, demonstrating Palantir’s expansion beyond supporting clandestine services. But the company is also staying close to its roots and expanding work with Project Maven, the Defense Department’s signature AI program. 

Palantir shares have surged 143% over the past year amid growing expectations for its AI platform, significantly outperforming the broader S&P 500 that’s up 29% over the same period. The company’s inclusion in the index later this month could be further supportive, as many tracking funds will need to purchase shares. The move—which will extend ownership of the mysterious company to millions of retirement accounts—was widely celebrated by retail traders who religiously follow the company. Palantir, which also counts American venture capitalist Peter Thiel as a co-founder, is somewhat unique in that individual investors control most of the company’s stock. 

“The rebels won,” Karp said in a video filmed for the many retail investors whom he praised for being courageous enough to invest their own money in what they believe in. Running through a forest and clutching hot pink hiking poles, he said that many doubters had viewed the company as a “Frankenstein monster, powered by a freakshow leader” but that it was now profitable and worthy of the world’s most important index. “We did it our way.”

While some analysts say that low degrees of institutional ownership can make a company’s shares more volatile because individuals are prone to making short-term moves, Palantir celebrates its retail shareholders. It’s easy to see why, as they provide it with a diversified and distributed ownership base that keeps any one shareholder or institution from having the power to sway its strategy. That all means the company can stay true to its rebel cause and operate unencumbered from any possible detractors from its overall mission. With friends like that, it’s Uncle Sam who may be the biggest winner.