Problems at Palantir Technologies (PLTR)

Palantir Technologies (NYSE: PLTR — $31.2 billion) builds software for government agencies and large businesses “to effectively integrate their data, decisions, and operations at scale.” The company, co-founded by Peter Thiel and backed by the CIA, is something of a black box and is up 130% this year on intense retail enthusiasm over the company’s purported AI capabilities. The Bear Cave believes Palantir is an AI imposter engaging in spurious games to inflate its books and obfuscate its less sexy role as an overhyped data consultant.

The retail investor hype around Palantir is hard to miss. One Palantir investor launched PalantirBullets, a newsletter created “to provide investors with knowledge and tools to spot asymmetries between narrative and reality on Palantir.” Another investor promotes a Discord server where nearly 1,000 investors share Palantir-focused memes and stock charts. The Motley Fool recently published an article titled “Why Palantir's Latest AI Initiatives Make It a Screaming Buy” and Cathie Wood has been buying Palantir shares in three of her ARK Invest funds.

Perhaps nowhere is that retail investor enthusiasm better captured than r/Palantir, a subreddit with over 47,000 members that speculate about Palantir stock. One top comment on a recent thread praises Palantir CEO Alex Karp and reads, in part,

“I can’t believe I’m back in the green. I invested at $35 and kept averaging down to $13.76. I never sold because I trusted in daddy Karp. Every word he said on earnings calls renewed my vigor for investing. I cannot wait for PLTR to hit $100 a share.”

Palantir management has done nothing to temper recent investor enthusiasm. In fact, “AI” was mentioned 68 times on the company’s Q1 May 2023 conference call, up from 17 mentions on the Q4 February 2023 call and just six mentions on the Q1 call in 2022.

And last month, in his letter to shareholders, Mr. Karp used a haphazard assortment of jargon and buzzwords to describe Palantir’s growth opportunities writing, in part,

“It has now become increasingly apparent that a platform that combines the capabilities of a foundational software architecture with those of the latest large language models is essential in order for the models to evolve into something of transformational value for large organizations.”

The Bear Cave believes the Palantir story is much less than meets the eye, and that the company is a glorified consultant masquerading as an AI leader aided by spurious transactions to inflate the company’s financial profile.