Palantir's high valuation will be difficult to justify.Finding the next big AI stock to buy and hold is a great goal for investors, but knowing which stocks to avoid is key as well.Famed investor Warren Buffett once said the first rule of investing is to never lose money. The second rule is don't forget rule number one. While losing money in investing is inevitable, it underscores that staying away from certain stocks is just as important as picking the right ones.In the AI investing realm, there are severa ...

Core Insights - Michael Burry, known for his accurate predictions before the 2008 financial crisis, provided a retrospective on his market commentary from early 2023, particularly focusing on his "Sell" directive issued on January 31, 2023 [1][2] - Following his "Sell" tweet, a banking crisis occurred, highlighted by the failures of Silicon Valley Bank and Signature Bank, which created panic in the financial sector [2][4] - Burry later acknowledged that the crisis would resolve quickly and admitted on March 30, 2023, that he was wrong to say "Sell," indicating a shift in his outlook [3][4] Summary by Sections Market Commentary - Burry's retrospective serves as a self-audit of his market signals during a tumultuous period, emphasizing the importance of context in his predictions [2][3] - His initial bearish stance was followed by a recognition of the Federal Reserve and Treasury Department's interventions that stabilized the banking sector, leading to a market rally instead of a crash [4] Social Media Influence - The post titled "/meme corrected" addresses the internet culture that often highlights Burry's bearish predictions while neglecting his subsequent adjustments [4][5] - Burry's decision to analyze and repost his 2023 timeline provides insight into his thought process and acknowledges the challenges even prominent investors face in their predictions [5]

Core Insights - The article highlights the significant growth and potential of Palantir (PLTR) within the Artificial Intelligence (AI) sector, showcasing its strong financial performance and increasing customer base [4][6]. Company Performance - Palantir reported quarterly sales of $1.2 billion, marking a 63% increase year-over-year [4]. - The company achieved a record Total Contract Value (TCV) of $2.8 billion, which is a 340% increase compared to the same period last year [5]. - Customer count grew by 45% year-over-year, indicating strong momentum and demand for its services [6]. Revenue Breakdown - US commercial revenue surged by 121% year-over-year, while US government revenue increased by 52% [4]. - Palantir closed over 200 deals worth at least $1 million, with 91 deals worth at least $5 million, and 53 deals worth at least $10 million [5]. Future Outlook - The company provided its highest sequential quarterly revenue growth guidance in its history for Q4, expecting a 61% growth [6]. - Palantir also raised its guidance for current year sales, adjusted operating income, and adjusted free cash flow [6].

Core Insights - Palantir, NVIDIA, and CenterPoint Energy are collaborating to develop a new software platform named "Chain Reaction" aimed at accelerating the construction of next-generation AI data centers [1][2] - The software will assist companies in overcoming challenges related to permitting, supply chain, and construction, as these data centers consume electricity comparable to that of a small city [1] - The initiative builds on previous collaborations between Palantir and NVIDIA, utilizing AI to address supply chain logistics for retailers like Lowe's [1] Group 1 - The project aims to integrate various types of businesses into the supply chain and construction processes, with NVIDIA collaborating with chip manufacturers like TSMC and CenterPoint managing grid upgrades and permitting [2] - Timely coordination across all stages is essential for the successful implementation of data center projects, as highlighted by NVIDIA's VP of Enterprise AI Products, Justin Boitano [3] - AI's capability to analyze data not typically stored in standard enterprise software systems can help identify potential delays through signals in communications between procurement departments and suppliers [3] Group 2 - Delays from any party involved, including energy companies, data center developers, operators, grid operators, and power generation companies, can compound due to their interdependencies [3]

Core Insights - Palantir Technologies has experienced significant stock volatility, with declines exceeding 30% on three occasions in recent years, resulting in substantial market capitalization losses [2] - Despite a strong performance driven by AI platform adoption and commercial growth, the stock's high valuation raises concerns about sustainability, as it trades at ratios much higher than industry standards [3] - Historical performance indicates that Palantir's stock can face steep declines during market crises, such as a 22.5% drop during the COVID-19 pandemic and an 85% decline during inflation shocks [5] Financial Performance - Revenue growth for Palantir is reported at 47.2% for the last twelve months (LTM) and an average of 29.3% over the last three years [11] - The company has a free cash flow margin of nearly 46.0% and an operating margin of 21.8% for LTM [11] - The stock currently trades at a price-to-earnings (P/E) multiple of 395.9, indicating a high valuation risk [11] Risks and Challenges - Valuation risk is significant, with a forecasted stock drop of 17% in November 2025 due to high valuation metrics, although robust revenue growth of 63% in Q3 2025 and raised FY25 guidance of $4.398 billion provide some mitigation [10] - Rising competition from decreasing AI costs and expanding large language models (LLMs) may impact Palantir's growth, with analysts predicting a moderation to 35% year-over-year growth for 2026 [10] - Ethical and public relations issues related to government surveillance contracts pose reputational risks, although the company's focus on AI ethics and recent defense contracts may help mitigate these concerns [10]

Core Viewpoint - The recent decline in Palantir Technologies' stock is largely attributed to a high-profile bearish bet, rather than fundamental issues with the company itself [2][3][4]. Company Performance - Palantir Technologies' shares have dropped nearly 20% from their early November peak, following a significant 3,000% increase since early 2023, raising concerns about a potential bubble in AI stocks [2][5]. - The company's revenue grew by 63% year-over-year to nearly $1.2 billion in the last quarter, with net operating income reaching $393 million, more than tripling from the previous year [12][15]. - Analysts project continued growth for Palantir, with expectations of over 20% annual growth in the decision-intelligence software market through 2033 [15]. Market Dynamics - The stock's current valuation is considered extremely high, trading at 230 times this year's projected earnings and nearly 170 times next year's expected earnings [11]. - The bearish sentiment surrounding Palantir has been amplified by Michael Burry's recent short position, which has influenced other investors to follow suit, creating a self-fulfilling prophecy regarding AI stock valuations [9][19]. - Despite the bearish outlook, the company's business model allows for low-cost scaling of its software deployments, suggesting that profit growth may outpace revenue growth in the future [16]. Competitive Landscape - Palantir serves high-profile clients, including the U.S. Department of Defense and private companies like Airbus and General Mills, positioning itself well in a market with limited direct competition [15].

Core Insights - The AI boom is shifting focus from model size and chip launches to energy and compute infrastructure, as highlighted by Palantir's new partnership with Nvidia and CenterPoint Energy [1][2] - The real constraint on AI innovation is identified as the power grid, which is lagging behind the rapid deployment of AI technologies [1][2] Group 1: AI Infrastructure Bottleneck - All technology companies with AI ambitions are facing limitations due to the slow approval of data center capacity by utilities, which is years behind AI deployment plans [2] - The exponential growth in industry demand for AI cannot be met without adequate energy distribution [2] Group 2: Strategic Positioning of Palantir - Palantir's initiative, Chain Reaction, aims to serve as the coordination layer for re-architecting energy infrastructure, focusing on utilities, grid operators, and data-center planners [3] - The longevity of infrastructure provides a strategic advantage over rapidly evolving AI models [3] Group 3: Nvidia's Role and Market Dynamics - Nvidia's involvement indicates a shift in compute economics, where the limiting factor is now the ability to build and power environments rather than chip fabrication speed [4] - Without significant grid expansion, Nvidia's future demand for GPUs may face constraints [4] Group 4: Future of AI Companies - The narrative is shifting from benchmarks of AI models to the availability of megawatts and the optimization of energy-compute networks [5] - The next leading AI companies will succeed not by having larger models but by having more robust power grids [7]

Core Viewpoint - Palantir has launched Chain Reaction, a new operating system aimed at enhancing the American AI infrastructure, reflecting the country's growing ambitions in the AI sector [1] Group 1 - The introduction of Chain Reaction is timely, coinciding with the increasing focus on AI development in the United States [1] - This new operating system is designed to support the expanding landscape of AI technologies and applications [1] - The launch signifies Palantir's commitment to being at the forefront of AI infrastructure advancements [1]

Market Overview - US stock index futures are all up ahead of the market opening on December 4, with Dow futures rising by 0.08%, S&P 500 futures by 0.04%, and Nasdaq futures by 0.01% [1] - European indices also show positive movement, with Germany's DAX up 0.79%, UK's FTSE 100 up 0.18%, France's CAC40 up 0.43%, and the Euro Stoxx 50 up 0.39% [2][3] - WTI crude oil prices increased by 0.47% to $59.23 per barrel, while Brent crude oil rose by 0.37% to $62.90 per barrel [3][4] Market Sentiment and Predictions - Bank of America predicts that after three years of double-digit returns, the S&P 500 will enter a "low excess return" phase in 2026, forecasting the index to close around 7100 points by the end of next year [5] - BlackRock asserts that the current AI investment cycle is driven by real corporate investments and productivity growth, distinguishing it from the speculative bubble of the early 2000s [6] Company-Specific News - The EU plans to investigate Meta's integration of "Meta AI" into WhatsApp, reflecting increasing scrutiny of large tech companies regarding generative AI applications [9][10] - Intel has decided to halt its network division spin-off plan, focusing instead on internal integration to enhance its AI and edge computing strategies [10] - Palantir, NVIDIA, and CenterPoint Energy are collaborating to develop a new software platform called "Chain Reaction" to expedite AI data center construction [11] - Salesforce reported a Q3 revenue increase of 8.6% to $10.3 billion, with an adjusted EPS of $3.25, and raised its revenue guidance for FY2026 to $41.45-41.55 billion [12] - Snowflake's Q3 revenue was $1.21 billion, exceeding expectations, but its lower guidance for operating margin raised concerns about the profitability of its AI tools, leading to an over 8% drop in pre-market trading [13] - C3.ai reported a Q2 FY2026 adjusted loss of $0.25 per share, with revenue of $75.1 million, slightly above expectations, but a 20% year-over-year decline in revenue highlights challenges in its core subscription business [14]

Core Insights - Palantir, Nvidia, and CenterPoint Energy are developing a new software platform called "Chain Reaction" to accelerate the construction of AI data centers [1] - The platform aims to address challenges related to approvals, supply chains, and construction for companies building AI data centers [1] - The initiative builds on previous collaborations between Palantir and Nvidia, focusing on logistics solutions for retailers like Lowe's [1] Group 1 - The "Chain Reaction" system will leverage AI tools to assist clients in overcoming infrastructure challenges related to energy production and distribution [1] - The project involves collaboration with various stakeholders, including energy producers, power distributors, data center developers, and infrastructure builders [1][2] - Nvidia's VP Justin Boitano highlighted the complexity of the supply chain system, emphasizing the impact on global ecosystem partners during the construction of large-scale infrastructure [2] Group 2 - AI technology is being integrated due to its capability to process data that may not be organized within traditional enterprise software systems [2] - Delays in procurement processes, such as email communications between a company's purchasing department and suppliers, can be detected by AI, allowing for proactive solutions [2] - Tristan Gruska from Palantir noted the interdependencies among energy companies, data center developers, operators, and grid operators, indicating that delays can compound across the network [2]