Palantir (PLTR) Balances Growth Deals with Investor Doubts

Palantir Technologies Inc. (NASDAQ:PLTR) is one of Goldman Sachs’s top growth stock picks. On February 18, Palantir Technologies Inc. (NASDAQ:PLTR) named Rackspace Technology its dedicated data migration and global implementation partner for its two flagship platforms, Foundry and Artificial Intelligence Platform, or AIP. Foundry facilitates enterprise data integration and analytics, and AIP operationalizes AI in real-world business decisions.

According to Palantir, enterprise clients have long struggled to move its deployments from pilot programs into full production. Now, the partnership with Rackspace simplifies and expedites it. Rackspace addresses issues such as complexity of data migration, security compliance, and cloud infrastructure setup using a governed operating model. Its pre-built security, compliance, and operational controls across hybrid cloud environments wraps around Palantir’s platforms and eliminates the need for clients to build that infrastructure themselves. This cuts deployment timelines to weeks or months.

Separately, on February 11, investor Michael Burry presented a bear case against Palantir and raised concerns about the broader AI investment cycle. In a 10,000-word essay published on Substack, Burry argued that the current pace of investment in AI infrastructure is unlikely to generate the long-term returns that investors are expecting.

On Palantir, Burry noted that the company was caught off guard by the rise of ChatGPT and the rapid commercialization of large language models, and that following that development, management began heavily featuring AI language in its earnings communications.

​Burry also challenged Palantir’s reported profitability. He argued that a large portion of the company’s earnings is effectively an “illusion” because the company relies heavily on stock-based compensation. So, when stock grants are counted as a real expense, the company’s profitability looks considerably weaker.

A day after Burry’s essay, on February 12, analysts at DA Davidson issued a response in which they concluded that Burry’s essay contained “no new evidence or an argument” that would lead them to change their view on Palantir’s business. As such, the firm maintained its Neutral rating on Palantir. They stated that the firm does agree with Burry’s broader concerns about the AI investment cycle and the issue of data center depreciation, but draws a clear distinction between those macro concerns and the specific situation at Palantir.

Palantir Technologies Inc. (NASDAQ:PLTR) develops software platforms for data integration, analytics, and decision-making, serving government agencies and commercial enterprises. Its products, including Palantir Foundry and Gotham.

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Disclosure: None. This article is originally published at Insider Monkey.