Over the past year, artificial intelligence (AI) has been the key undercurrent of the technology sector. A small group of mega-tech companies known as the “Magnificent Seven” have each made a series of spectacular investments in many areas of the AI field.
Microsoft stands out from the rest of its Magnificent Seven competitors considering the Windows developer launched the latest AI revolution after a multi-billion dollar investment in OpenAI – the startup behind ChatGPT.
In fact, this move sparked a dispute between technology companies that wanted to benefit from AI in every way possible. A software company that has emerged as a legitimate competitor to major technology companies is Palantir Technologies (NYSE:PLTR).
2023 was a milestone year for Palantir in every way – from acquiring new customers to increasing revenue and increasing profits. Given the 190% increase in its stock price over the last year, some investors may be wondering whether Palantir could be the next big opportunity in tech.
Let’s dive into the ins and outs of Palantir’s business and assess whether the company has the potential to become the next Microsoft.
Palantir is a strong company, but…
Palantir offers four different software suites: Apollo, Gotham, Foundry and Artificial Intelligence Platform (AIP). The company markets its technology to the U.S. military and Western allies, as well as large private sector companies. The company’s well-known customers include: Lowes, Archer Aviation, Lennarand the US Army.
All of Palantir’s platforms are powered by AI, and each has unique and specific capabilities to solve challenging problems. Essentially, Palantir helps companies process data trapped in disparate systems and enables decision makers to perform complex queries and gain insights into business issues more easily.
While this may sound like a straightforward mission, the underlying technology powering big data analytics is quite sophisticated. Therefore, Palantir is able to command a high price for its software. According to company filings, average revenue per customer over the past 12 months for Palantir’s top 20 customers is $55 million.
Additionally, Palantir closed over 100 new deals in the fourth quarter ended December 31 – 21 of which were worth at least $10 million.
Not surprisingly, Palantir’s penetration of the enterprise software market has led to important strategic relationships. Recently the company announced a partnership with oracle The company will migrate data from its AI platforms to Oracle’s cloud infrastructure.
Considering how early the AI narrative is, I think Palantir’s best days are still far ahead. But does that necessarily make Palantir the next big disruptor?
…is it the next Microsoft?
Microsoft is one of the most innovative companies of all time. The Windows operating system completely revolutionized personal computing in the modern era and paved the way for Microsoft to become a versatile giant in the technology sector.
Over the past few decades, Microsoft has made a number of smart moves to make it easier to enter new markets. In 2016, the company acquired professional networking site LinkedIn. Following the deal, Microsoft implemented a range of sales and marketing subscription services into the platform. This deal helped strengthen Microsoft’s existing productivity applications in the Office suite and gave the company direct access to a specific area of the social media landscape.
Recently, Microsoft supplemented its Xbox gaming segment by spending a whopping $75 billion on Activision Blizzard.
The overarching theme here is that Microsoft is one of the most diversified companies in the world. Its ecosystem includes personal computing, cloud infrastructure, social media, gaming, software development and now its newest frontier – AI.
The company’s dominance across the technology space has drawn acclaim from investors over the years, and Microsoft’s $3 trillion valuation reflects that.
In contrast, Palantir is currently a pure software developer. In my opinion, I don’t see a similar development at Palantir as at Microsoft. For me, Palantir does one thing very well. On the other hand, Microsoft offers a variety of different products and services for all types of end users.
That’s not to say that I don’t think Palantir can compete with Microsoft in the AI space. Palantir’s results so far in the AI arms race are both impressive and encouraging, and I think the company will continue to be a leader in this space.
With that in mind, however, I think investors should temper their expectations about Palantir’s cap and the company’s potential trajectory. While I don’t see Palantir as the next Microsoft, I do believe it could become the next big name in enterprise software – similar to Oracle or Foreclosure.
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Adam Spatacco holds positions at Microsoft and Palantir Technologies. The Motley Fool has positions in and recommends Lennar, Microsoft, Oracle, Palantir Technologies, and Salesforce. The Motley Fool recommends Lowe’s Companies and recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
Is Palantir the next Microsoft? was originally published by The Motley Fool