Core Viewpoint - Palantir Technologies has experienced significant growth but is highly valued, while Alibaba, despite slower growth, presents a more sustainable valuation opportunity in the current market environment [1][6]. Palantir Technologies - Palantir's annual revenue increased from $1.1 billion in 2020 to $2.9 billion in 2024, achieving profitability in 2023 and more than doubling its net income in 2024 [2]. - Analysts project Palantir's revenue and earnings per share (EPS) to grow at a CAGR of 38% and 63%, respectively, from 2024 to 2027 [3]. - The growth is supported by increased government contracts and the expansion of its commercial business, with geopolitical factors favoring its Gotham platform and rising demand for its Foundry services [4]. - Palantir's current market cap is $423 billion, trading at over 300 times next year's earnings and 75 times next year's sales, indicating a potential market cap reduction to $227 billion if valuations normalize [5]. Alibaba Group - Alibaba, the largest e-commerce and cloud infrastructure company in China, trades nearly 50% below its all-time high due to regulatory fines, COVID-19 lockdowns, and U.S.-China trade tensions [7][8]. - The company is stabilizing its business by expanding into higher-growth overseas markets and enhancing its logistics platform [9]. - Alibaba's cloud infrastructure is benefiting from the rollout of its large language models (LLMs) and increased spending on cloud services driven by the AI boom [10]. - From fiscal 2025 to fiscal 2028, Alibaba's revenue and EPS are expected to grow at a CAGR of 8% and 12%, respectively, while trading at just 19 times next year's earnings and 2.3 times next year's sales [11][12]. - If Alibaba meets analysts' expectations and achieves a valuation of four times its forward sales, its market cap could nearly double to $710 billion, potentially surpassing Palantir's market cap [13].

Company Overview - Palantir is a data mining and analytics company that gathers data from various sources to identify trends and assist clients in making informed decisions [4] - The company operates two main platforms: Gotham for government clients and Foundry for commercial clients, with notable users including Morgan Stanley and Airbus [5] - Palantir was initially funded by the CIA's venture capital arm and has leveraged its government contracts for growth, including significant historical uses in national security [6] Stock Performance - Palantir's stock has increased over 40% year-to-date, contrasting with a decline of over 10% in the Nasdaq [2] - The company went public via a direct listing on September 30, 2020, and initially projected annual revenue growth of at least 30% through 2025 [7] - Palantir exceeded its growth estimates with 47% in 2020 and 41% in 2021, but saw a slowdown to 24% in 2022 and 17% in 2023 due to timing of government contracts and macroeconomic challenges [8] Financial Performance - In 2023, Palantir turned profitable on a GAAP basis after streamlining spending and reducing stock-based compensation [9] - Revenue increased by 29% in 2024, with GAAP earnings per share more than doubling, driven by growth in the U.S. commercial business and increased demand for government services [10] - For 2025, Palantir expects a revenue rise of 31% while maintaining profitability, with analysts projecting a compound annual growth rate (CAGR) of 31% for revenue and 51% for GAAP EPS from 2024 to 2027 [12] Market Position - Palantir's growing market capitalization and stable profitability led to its inclusion in the S&P 500 in September and the Nasdaq-100 in December [11] - The company's current market cap is $253 billion, trading at 67 times this year's sales and 354 times this year's GAAP EPS, indicating potentially overheated valuations [13] Challenges - The U.S. commercial business, which accounted for 24% of revenue in 2024, may face challenges due to tariffs and potential spending cuts from the Trump Administration [14] - The government business could also be impacted by proposed reductions in the U.S. defense budget, which may affect future contract acquisitions [14] - Concerns about missing ambitious targets again, as seen in 2022 and 2023, could lead to a reassessment of the stock's valuation [15]