This Changes Everything for Palantir (The Military Just Confirmed It)

Palantir is now one step closer to being completely irreplaceable, especially for the U.S. military. Joining us today is Chris Marcotch with an update on where this company is today and information on a huge move for the company when it comes to their defense contracts with the U.S. government. Chris, we have a lot to break down on Palantir today. It's been a long time since we've done an update on the company and so much has happened. We're gonna get into that big announcement in just a little bit and what it means for Palantir's future and why it makes them so irreplaceable. But I wanna talk first about the moves the stock has seen in the last month or so. The stock has really moved a ton. It jumped roughly 30% in early August. So let's start there. Why did we see such a big jump in the stock last month? Well, Bridget, it came down to the company's earnings reports and investors finally realizing that good news was good news. I mean, Palantir delivered an earnings report. It was stellar on every measure. It proved that the idea that Palantir's growth is not slowing down in the near term and investors finally interpreted it that way and rewarded it with a stock that you and I have talked about and I've said repeatedly since probably January or maybe March of this year was very much undervalued right now and was oversold. And so, yeah, the stock went up from 120 when the earnings report came out and now it's up around 170 and I think that's reflective again of the fact that I think people are looking at the earnings report and they're realizing that good news is good news and that when we're looking at companies in this AI trade, you're gonna be separating winners from losers and Palantir's clearly a winner right now. It's a winner right now, but I know we have a lot of naysayers out there too who say Palantir has really been struggling this year. The stock was doing a lot of nothing the last few months and even with this big increase that we saw in August, the stock is still only up a little less than 10% for the year. So if you're a new Palantir investor, the stock hasn't performed super well for you so far in this year anyway. Let's talk about long-term and that's really what we're mostly gonna talk about in this video today, is long-term, what kind of growth we could have on the horizon for Palantir and some of the big movements that it's making that are making this company so deeply integrated in the entire US military along with a lot of other private companies too. So we're gonna get into all of that, but I wanna talk a little bit about the stock performance in general. Again, I think for investors, this hasn't been a top-performing stock for them. No, if you're looking at, when you compare it to some other companies, not just in the AI trade, but in the S&P 500 in general, Palantir's been a laggard. It's, as you said, in the last 12 months, it's only up 9.8% and it's down, even with this rise after the earnings report, it's still 3.5% for the year. And so certainly I can understand that if you were an investor that came late to Palantir, you're maybe feeling a little bit disillusioned, but I've said repeatedly, I'm looking at Palantir as a stock that I plan on holding not only for the rest of 2026, but through 2027, 2028 and beyond. And I think the payoff is going to be very good if I continue to do that, which I, again, which I plan to. And the reason why I say that is, in spite of what people think of as a lofty valuation, one of the things that people have to understand about the valuation and, you know, I'm going to make the math as simple as I can, because I don't want to, I don't want to get too far into the woods in this, but Alex Karp's talked about hitting a free cashflow target with Palantir of between 15 billion and $18, $18 billion in the next two years. That seems like impossible when you look at where their, you know, their free cashflow is today. But he made a same, a similar bold call about where the company's full year revenue was going to be at the end of 2025 in 2023. And it turned out that he hit that number almost exactly. CEOs, founders have a way of kind of knowing their business better than we do. So here's why that number matters, Bridget. Palantir's full year 2025 adjusted free cashflow was around 2.27 billion. So you can imagine that people are looking at that Karp's call of 15 to 18 billion in the next two years and thinking, that's impossible. But if he hits that, then all of a sudden, for Palantir to be worth the valuation it's worth today, doesn't really look that unreasonable if Palantir just delivers average performance of a software company in the eight years after that. So everybody's looking at it and saying, Palantir has to have this incredible performance for the next five, 10 years. Karp's saying, I gotta do it for the next two years. And if I do this for the next two years, I'm playing with house money for the next eight. And that's the valuation that hasn't been repriced in yet. And that's what Karp is looking at. He's saying, I'm telling you, we're gonna have this great two years, which it looks like they will. And then after that, even if the growth slows down, and I'm not saying it's gonna slow down, but even if it does, he's already justified the current valuation and he's done it in two years. That's the story that investors have to think about when they think about Palantir's valuation. It's not just people who are bullish on the stock because vibes, there's actual numbers behind it that you can sink your teeth into and say, yeah, that would make sense. If he does this, then the math works out. The math works out with where the stock is today. I think the question investors have is, how much room for growth is there two years from now? If Karp's prediction does come true, is this stock worth more than what it's worth today? Or will it just justify the cost of entry that investors are doing today two years from now? I mean, that's the real question, is how much more can it grow? Or are we already pricing in all the growth this company has to offer? Bridget, that's a great question. And I take the L on that one because I didn't tie that up in a nice bow for investors. Here's some numbers that they can really sink their teeth into. And I'm using a very, very, very basic discounted cashflow model. A discounted cashflow model for investors that might not be familiar with. It's just kind of a standard tool for valuing a stock based on their future cash that they're expected to generate. If you look at Palantir and you say, they're gonna have a conservative 20% annual cashflow growth rate over the next 10 years, it produces a value of about $74 a share. That's the number that bears have been sinking their teeth into. Because they say, well, the stock's priced at $173 right now even if you're growing at 20%, you're only gonna be, your stock is grossly overvalued. However, if you run that same model at 50% annual growth over the next 10 years, which still is quite significantly below Palantir's current growth rate, the fair value jumps to roughly $600 per share. And that's where the 15 to 18 billion is critical for understanding. What I'm saying is if Palantir has incredible growth, well over 50%, well over 80% free cashflow growth in the next two years, then for the next eight years, even if they're averaging around 20 to 30%, which is more of the software industry's average, they're gonna be well above that. They're gonna be easily able to hit that 50% average over 10 years. And that's what justifies the stock price. And it's really a question of, are you believing in the next two years of the story or are you trying to suggest that Palantir has to have this outsized performance of like 50% every year for the next 10 years? That's not true. Yeah, it's that immediate growth story that we're interested in here. And I think that that is really separating the winners from the losers in this market right now of how much growth can we see in the next two years? Because the amount of growth still coming from the AI story in general, the amount of growth coming to the economy in general over the next two years is massive. And I think the companies who are winning are the ones that really perform incredibly well over these next two years. And that's gonna set us up for who the winners of the future will be. And that is exactly the topic of this report. We have a special report out right now about the next seven stocks that will be bigger than today's winners, bigger than that Nvidia, the Google, the Teslas of today, the companies that have become the winners now. Well, who's going to be that next big winner? And could Palantir be one of them? Make sure you check out this report. It's the seven next big stocks to look at in the market. And you get free access as one of our YouTube viewers today. You can scan the QR code or click the link in the description and get that special report right now on Market Beat. It's normally a $30 fee if you're not a member of Market Beat. So it's free just because you watch our YouTube channel today. And this one was written by Thomas Hughes. It's the seven stocks that he thinks are gonna be the next big thing in the market for that two years down the road timeframe. Again, click that link in the description and get that report now. Okay, Chris, let's get onto why you are expecting that continued growth for Palantir. What's the catalyst behind why this company is gonna continue to see that outsized growth over the next two years? Palantir is proving itself to be indispensable to the companies and the organizations that it does business with, including the US government. A lot of investors have heard Alex Karp speak about this concept of sovereign AI extensively since their earnings report. And the idea of sovereign AI is a government or a company needs to keep control of its own data, its own models, its own compute, instead of just handing them over to a third-party vendor. That's Palantir's business case in a nutshell. Palantir is there to orchestrate not to own a company's assets. They're not there to sit there and so the company always owns their data. Palantir is just there to orchestrate it, to make sure that all the areas of the organization are seeing the relevant data that they need to see so that they get the actionable insights that they are looking to get. And that's where the story got really interesting in the last week or so, because Palantir signed a deal with the US Army. The Army Contracting Command awarded Palantir a prime agreement to produce and deliver eight next-generation Titan ground stations. They're partnering with Anduril. The total contract is about $192 million. It's split between Palantir and Anduril, but Palantir is expected to get about $127 million of that. Now, I get it and it's a fair question. People will say, well, $192 million, that's not a whole lot of money. That's not a tremendous amount of revenue, especially when CARP's talking about $15 to $18 billion free cashflow target. But here's why that matters, because that contract is sovereign AI in a nutshell. It's entrenching Palantir more as a full battlefield system provider for the US military. We've already talked about in the past that Palantir's AIP or Palantir's Foundry, it's already the de facto operating system for the US military. This is entrenching Palantir more and more into that because this contract is now making Palantir more like a system integrator for not just their own products, but also for coordinating with partners like Anduril and L3Harris. And so Palantir is now not only just using its own product and orchestrating its own product across all the areas of the US Army, but it's also saying it's gonna be coordinating Anduril's products and L3Harris's products and still, again, allowing the US Army to own the underlying data underneath it. That's a key part of this. And again, it's a way of showing that this is sovereign AI in action. So much to talk about in that answer, Chris, so much to break down. And we're gonna get into more of exactly why this is such big news for creating that moat kind of for Palantir and what makes it more irreplaceable, especially for the US military. I'll get to that in a minute, but I first wanna start out with a question that popped up in my mind of what I continue to hear from investors and viewers who watch any conversation we have about Palantir. I kind of hear two sides of this theory from Alex Karp about keeping sovereign AI, keeping your data and your information secure. Some say, the naysayers say, well, Karp is just a good salesman and he is trying to create a problem where there isn't a problem and he's just selling this concept because it's good for his company. And then you hear from other people who say, no, this makes a lot of sense. There's a little debate out right now about how much personal information the general public is sharing with these AI models and how much information these AI models now have that was never public before. And now people are just giving access to all of this information to AI models. And so I wanted to hear a debate between those two theories. Is this a real issue or is Alex Karp really just a good salesman? I think both are true, actually. I think Karp is a good salesman and he's very passionate about Palantir and the values that Palantir adheres to. That doesn't mean that he's not addressing a real problem because you're seeing companies such as Microsoft take a very aggressive tone of trying to suggest that, well, no, we really are doing sovereign AI. They're trying to bend over backwards to show that they are actually allowing the client to own their data, but it doesn't really seem possible when you're looking at what they're providing because what they're providing isn't the same thing that Palantir's providing. That's what Karp is saying is you're running a risk, okay, of not owning your data. And that's also being played out, Bridget, on the corporate side where you see a lot of corporations struggling with the idea of, well, we give AI access to some of our data, but we don't give AI access to all of our data. Well, why wouldn't you want to give AI access to all of your data if you weren't worried about all of your data being compromised? If you weren't worried about some of your data perhaps being compromised, why wouldn't you worry about that happening? And so I think that's really the issue is in practice, you're seeing a lot of companies not giving the LLMs access to all of their data, whereas with Palantir, companies are very comfortable with allowing it to have all their data because they're not worried about that data leaving the company. That data is still owned by the company and Palantir's there as the orchestration layer. Well, and that's why it makes so much sense that the US military is one of Palantir's biggest clients because all of their data needs to be secure as a federal government, as the military. You don't want any other country's AI model getting ahold of your information. And so that makes sense. But I think that argument for the commercial companies, the private companies, makes a lot of sense too, especially in this age of we are just figuring out AI. And I think that that is a part of the conversation I wanna talk about here for Palantir potentially as a positive for them of, could Alex Karp actually be right because we're in a new industry. We're in a kind of the wild, wild west of the AI rollout and what's happening in companies, what's happening in personal use, what's happening in the US military. It's all new. It's all, I don't wanna call it an experiment, but almost, right? We're just trying to figure all of this out. And I think figuring out a niches within that of security of information, will we have legislation that comes along eventually to help secure more of this information. Palantir just could be on the cusp of something that again is just an industry that's still trying to figure out where are the holes, where are the dangers, where are the niches that you can fit in in this AI story. So just your thoughts on where Palantir fits into that kind of a conversation. Are they ahead of the curve on kind of the market or commerce in general, trying to figure out the true impact of AI? I think that really goes back to, in an ironic way, it goes back to the biggest criticism that's been leveled at Palantir in the past is that it's too dependent on the US government. But I think that's really where Palantir's greatest strength is right now in what I would agree with you when you're talking about AI, this is kind of the wild west. We're in a trust but verify stage. You know, we don't know what we don't know and we're trying to figure that out. But Palantir cut its teeth with the US government, not just the military, not just the Pentagon, but with different departments within the US government. And that is incredibly confidential information. It's incredibly proprietary information. And Palantir has earned that credibility. And that's the credibility that it's taking out to its commercial customers. It's basically saying, the Pentagon trusts us with this, you can trust us with this. And corporations are basically now, once Palantir's in the fold, they're saying, yep, we can trust Palantir with this information. And that's the whole purpose. And that's what Carp's been talking about for a long time. You can trust us with this information. We're proving that with our clients. Can these other companies say the same thing? This isn't me trying to bash any of these other companies. The answer is, I don't know. But I'm saying, I don't think Carp's simply talking his book. I understand why people can believe that, but I don't believe he's saying that. I think Carp's saying, look at our track record, look at who we've established that track record with, then ask yourself if you think our products are trustworthy. I think it's a fair argument. Yeah, and I know we've talked in previous videos on Palantir about one of the things, with especially their commercial customers, is that once they sign on with Palantir, you're not seeing people drop the company. They continue their subscriptions. Once they're there and they see the product and they use it, they're doubling down and continuing to grow their relationship with Palantir. So I think that that use case is a powerful story for Palantir's future too, is that once a company uses it, they like it enough that they continue using it and even grow that Palantir footprint within their company. I wanna talk a little bit about those moats and about being an irreplaceable company, about not just for the US military, but these private companies as well, about once they start to use Palantir and they integrate it even more, as this new contract with the military is showing, it gets so fully integrated. Is it truly becoming an irreplaceable company? I'm curious what you think about the word irreplaceable and also that moat discussion with Palantir too. I think when you start talking about Palantir as an irreplaceable company, one of the things that I think about when I hear that word is, so what happens if a company decides to drop Palantir? And one of the things that happens, and it's not, this isn't unique to Palantir, but it's certainly worth considering is, once you drop Palantir, the Palantir ontology goes with it. So it doesn't stay with your company. So it's not like you can just say, well, I bought this and now it's mine to keep. If you move away from Palantir, you lose all of that. That leaves your company. And so if you're gonna be the decision maker that decides that's gonna happen, you have to be realizing, okay, what comes next? And I think what many people realize is that there is either A, not an answer to what comes next, or B, the answer to what comes next is not gonna give you what Palantir gives you. And that's why I believe Palantir's truly establishing itself as something that's irreplaceable for a lot of companies. They're just simply realizing we need this and we can't do without it, and there is no other viable alternative to what we're getting from Palantir. So how does that show up specifically in this new military contract? I know you already hinted at it a little bit, that it's more than just this $170 million contract, about what that says about the future growth for the company because this contract, that proof in the pudding, so to say, that this contract is for the future. Yeah, I think it's because what this contract is showing is that now the U.S. Army is sort of taking Palantir and they're saying, okay, we know what you can do for us, but now what we want you to do is we want you to coordinate with Anduril, we want you to coordinate with all three Harris. We don't have to because we trust you to do that. And we trust you're gonna do that and still serve our best interests. That's an incredibly powerful position for Palantir to be in. And I think, again, that's why that just makes that case that it's becoming more indispensable to the U.S. military. Interesting, and that speaks a lot towards that future growth that we talked about. So to bring this conversation full circle on that long-term impact, if we continue to see more of these expanding Palantir's reach, not just in the U.S. military, but also in these companies as well, does that speak towards that outlook that we have for Palantir two years or 10 years down the road? Oh, I think absolutely, because one of the things that, it's kind of funny to me because, and you and I have talked about this before, Bridget, the criticism with Palantir two years ago was, well, it's not growing its commercial business. Then just six months ago, the concern was, okay, it's growing its commercial business, but now it's not growing its U.S. military, the U.S. military business was at risk. Now they're growing the U.S. military business again, and now people are saying, well, the commercial business is at risk. They keep looking for things that aren't true, and the earnings reports clearly showing Palantir is growing both sides of the business. They're growing them at above average rates, and there's really no reason to believe that they're not gonna keep growing those. And if they do continue growing those, I do think that that leads Palantir on that trajectory to being one of those winning companies in this AI growth story a couple of years from now. Again, if you wanna check out that list from Thomas Hughes on the next seven companies that could be the next big AI stock, even bigger than Nvidia or Google, check out this free report today by scanning the QR code or clicking that link in the description. It's one you don't wanna miss if you haven't checked it out yet. This is one where these names really could have that two-year outlook to be that next big growth story. And I'm not sure if Palantir's on the list. You'll have to check it out for yourself to see. If you wanna hear more Palantir discussion, make sure you watch this video I had with Tom Nash, a big Palantir bull. He was on just a couple of months ago and we talked a lot about Palantir and that sovereignty that Chris and I were just talking about now. See what Tom Nash has to say in that full interview here.