PLTR Unique Value in Volatile AI Trade, New NVDA & NBIS Partnerships

[music] >> All right, welcome back to the Tech Corner. I'm George Tsilis, senior markets contributor here with the Schwab Network. On this week's edition, we're going to be revisiting Palantir Technologies. Now, Palantir Technologies is an enterprise software company specializing in turning large amounts of complex data into operational decisions. The company originally built its software for US intelligence and defense agencies, but it has expanded rapidly into commercial enterprise. Palantir's major software platforms include Gotham, which is primarily used by defense and intelligence agencies, Foundry, which integrates data and business operations across an organization, and Apollo, which manages secure software deployments across cloud, on-premise, and highly restricted environments. Lastly, the AIP, or what's called artificial intelligence platform, connects large language models and AI agents to an organization's proprietary data and operating systems. The bigger story today is Palantir is evolving from a data analytics company into an operating system for enterprise and sovereign artificial intelligence. Now, when it comes to competition, Palantir competes with companies across enterprise software, cloud data, and artificial intelligence. For example, Snowflake competes in enterprise data platforms, Oracle, IBM, and Microsoft compete across enterprise software, databases, and artificial intelligence, and cloud providers like Amazon, Microsoft, and Google increasingly offer competing AI and data management capabilities. Lastly, companies such as OpenAI and Anthropic could compete at portions of the AI application layer. Now, Palantir is somewhat different from other AI model developers. Its primary business is not creating the underlying AI model, it is connecting models to an organization's actual data, authorizes permissions, and business process so artificial intelligence can make decisions and take actions in a controlled environment. Palantir's biggest competitive advantage is what it calls ontology. In simple terms, the ontology creates a digital representation of an organization's real-world operations. Instead of AI simply answering questions, Palantir could connect AI to things such as inventory, factories, aircraft, supply chains, customers, or even military assets as well. This allows artificial intelligence to move from generating information to actually helping operate the organization. Palantir is also model agnostic. Customers can use models from companies such as OpenAI, Anthropic, Google, or even open-source developers without completely rebuilding their underlying data architecture. This is becoming especially important as governments and corporations increasingly want sovereign artificial intelligence, meaning they maintain control over their data, models, as well as computing infrastructure. Going back to August 3rd of this year, Palantir recorded its second quarter results, showing another significant acceleration in growth. Revenue reached approximately 1.94 billion, up 93% year-over-year, and 19% quarter-over-quarter sequentially. US revenue was a standout, up 115% to 1.57 billion, and another was commercial revenue, which increased 149% to $764 million. dollars. US government revenue was up 90% to 809 million, while adjusted free cash flow also improved to 1.22 billion. This represents an adjusted free cash flow margin of around 63%. Lastly, the company guided with US commercial revenue expected to grow 134% for the year. So, therefore, the commercial side of Palantir is now growing even faster than the government business that originally defined the company. Also, when it comes to recent AI developments, the next phase of Palantir's strategy increasingly centers on sovereign artificial intelligence. In September, Palantir expanded its partnership with Nvidia. Now, Nvidia is using Palantir Foundry and AIP technology inside its own supply chain, combining Palantir software with Nvidia's AI models to identify constraints and improve operational decisions. Palantir also partnered with Nebius, naming it a preferred sovereign AI infrastructure partner. This gives Palantir customers another way to run AI models while retaining control over their own compute, data, as well as models in house. Lastly, Palantir increasingly wants to control the software and operating layer around AI regardless of which model or computing infrastructure a customer chooses. Now, let's look at some other positives for Palantir. First off, as I mentioned, Q2 2026 results set those new records with 93% year-over-year revenue growth, as well as 157% net dollar retention rate. The company also added 220 deals worth at least $1 million, supported by a strong US commercial segment. Management lifted full-year guidance as well and expects to continue accelerating growth in sales and earnings in a 2027. The company's AI approach and partnerships with Nvidia and Nebius underpin large contracts and customer retention, as it empowers clients to control and customize their AI models while maintaining strict data privacy and operational security. Palantir also holds over $9 million in cash with virtually zero debt, fueling business expansion and providing significant financial flexibility. Not only is revenue growth robust, Q2 also demonstrated $1.22 billion in operating cash flow, as well as 62% operating margin. Therefore, this combination of extremely high revenue growth and expanding margins is unusual even amongst large software companies. Now, another positive is diversification. Palantir is no longer primarily a government contractor. Its software is increasingly being deployed across multiple industries, such as manufacturing, aviation, healthcare, insurance, financial services, as well as supply chains. Now, despite those positives, let's also address some concerns. The biggest concern for Palantir remains valuation. The company has a market capitalization close to $480 billion and forward earnings per share is approximately $1.62. This places the stock around 124 times forward earnings. compared to its other peers in the application software space of around 22 times earnings. Palantir also trades around 78 times trailing revenue. These are extremely high valuation multiples. Now, the argument in favor of that valuation is that Palantir is also producing extraordinary growth. Forward revenue growth is approximately 63% and forward EBITDA growth is estimated to be around 89%. So, the valuation debate isn't whether Palantir is growing quickly. It clearly is. The question is whether it can sustain something close to this growth rate long enough to justify a multiple that already prices in years of exceptional execution. Another concern is that revenue growth is increasingly concentrated in the United States. International commercial adoption has not accelerated the same extraordinary rate as it has in the US. And lastly, competition will remain intense as cloud providers, enterprise software companies, and AI model developers build increasingly complex enterprise AI products. Now, this is the point where we look at the technical picture for Palantir. As we can see, Palantir has recently improved significantly since early August earnings announcement. The stock is trading around $199 and recently reached a new 52-week high near the $213 level. After spending much of the first half of the year in a corrective pattern, Palantir broke sharply higher following that August earnings report and has returned to a strong intermediate-term uptrend. The stock is trading above its rising 50-day moving average, as well as its major long-term moving averages, both the 100 and 200-day moving averages. This confirms the broader bullish trend in Palantir. Now, from a momentum standpoint, daily RSI is approximately 61. That is a positive momentum reading, but importantly remains below the traditional overbought threshold of 70. Daily MACD is also positive at approximately 0.43, indicating that near-term momentum remains constructive. The weekly chart also confirms that a stronger intermediate-term setup is there. Weekly RSI is approximately 63, which remains bullish without being technically overbought. And weekly MACD is strongly positive at approximately plus 5.7. So, both the daily and weekly momentum indicators are currently moving in the same direction. The first important support area is approximately $183, which corresponds closely to the rising 50-day moving average, or if you want to put it, the 10-week moving average. Below that level, approximately $155 to $157 represents a more significant intermediate-term support area. Therefore, a decisive breakout at above that level will put the stock back into price discovery. So, in conclusion, one could describe the technical picture as bullish on an intermediate-term trend standpoint, with positive momentum, but approaching an important test of the previous highs. That is to summarize, Palantir has evolved significantly from a government-focused data company investors knew several years ago. Today, the company is increasingly positioning itself as an operating system for applied and sovereign artificial intelligence. Its core advantage is not necessarily building the world's best AI model. It is that of connecting AI models to proprietary data in real-world operations where companies and governments can actually use them. That strategy is producing extraordinary financial results. And partnerships with Nvidia and Nebius expand Palantir's opportunities across commercial AI and sovereign infrastructure. Fundamentally, the company continues to execute an exceptional level. However, the problem is that the stock price may already reflect an extraordinary amount of future success. With the stock approaching its previous highs at around $213, that area becomes an important test before the next earnings report on November 2nd. All right, that's it for this week's edition of the Tech Quarter. Please don't forget to like and subscribe to the Schwab Network. I'm George Sills. We will see you here next week.