Investment Decision between Palantir and Alphabet Shares: Affluent Investor Ken Griffin Offloads One and Picks Up Another
Researchers at Forrester Research have identified Palantir Technologies and Alphabet as leading entities in the realm of artificial intelligence (AI) and machine learning platforms. These platforms consist of various tools that facilitate model training and application development.
Notably, Ken Griffin, a billionaire and the mastermind behind the most profitable hedge fund in history, Citadel, decided to sell Palantir's stock and invest in Alphabet's stock during the third quarter. His acquisitions consisted of:
- Selling off 5.1 million shares of Palantir, reducing Citadel's stake by a significant 91%
- Purchasing 244,835 shares of Alphabet, thereby bolstering Citadel's stake in the firm by 20%
Here's what you should comprehend about these two titans in the AI market:
Palantir: The stock Ken Griffin's Citadel sold off
Palantir is renowned for its expertise in data analytics, but it has gained traction in the AI platform market thanks to its Artificial Intelligence Platform (AIP). AIP provides generative AI capabilities to its core analytics platforms, Gotham and Foundry. These tools allow businesses to integrate and query data, thereby uncovering insights that bolster decision-making processes.
Palantir's allure lies in its distinctive ontology-based architecture. Ontology refers to a software layer that bridges digital data with real-world objects and illustrates the connections between them. Users can engage with this ontology by means of analytical tools for the purpose of dissecting information and automating tasks.
Palantir boasted impressive figures in the third quarter. Its customer base swelled by 39% to 629, and the average revenue from existing customers rose by 18%. Correspondingly, revenue surged by 30% to $726 million, marking the fifth consecutive period of sales growth. Furthermore, non-GAAP earnings expanded by 43% to $0.10 per diluted share. It's clear to see that Palantir's operations are thriving.
However, Malik Ahmed Khan, an analyst at Morningstar, has raised a flag regarding the disparity between Palantir's business performance and its stock price. He stated, "Palantir is an exceptional company with a wealth of potential in AI and beyond in big data. However, when we delve into its valuation, it appears as though the fundamentals don't align."
Experts predict that Palantir's adjusted earnings will surge by 31% over the next 12 months. This high valuation of 188 times adjusted earnings has prompted concerns among investors, who should steer clear of this stock and existing shareholders might want to consider reducing their holdings. Unless earnings growth exceeds expectations substantially, Palantir shares likely face a downturn at some point.
Alphabet: Ken Griffin's Citadel's investment choice
Alphabet is the umbrella corporation housing Google, which has two powerful growth drivers. First, Google serves as the largest adtech company in terms of revenue, with digital advertising expenditure predicted to increase by 10% annually through 2028. Second, Google operates the third-largest public cloud, and cloud services spending is projected to grow by 19% annually over the same period, as per International Data Corp.
Investors are largely preoccupied with the possibility that Alphabet may lose its dominance in internet search due to the rise of more sophisticated generative AI. This could hinder its ability to engage with consumers and collect data, adversely impacting its advertising business. However, Alphabet is leveraging its decades of AI know-how to address this challenge.
For instance, Alphabet has recently incorporated generative AI overviews into Google Search to help internet users grasp topics rapidlier. CEO Sundar Pichai asserts that these enhancements have boosted usage and satisfaction, particularly among younger demographics. Moreover, the company has launched AI tools to generate media content for ad campaigns and tools to assist brands in more effectively targeting their advertisements.
Beyond advertising, Google is banking on the rising demand for AI cloud computing services. Forrester Research recently recognized Google as a leader in AI infrastructure solutions and foundational large language models. Its strength in these areas enabled it to gain market share in the third quarter, as per Synergy Research Group, while Amazon and Microsoft lost ground.
Alphabet posted strong financial results in the third quarter, surpassing estimates on both the top and bottom lines. Revenue grew by 15% to $88 billion, representing a sequential uptick from the previous quarter's 14% growth. Meanwhile, GAAP earnings soared by 37% to $2.12 per diluted share, indicative of a four-point expansion in operating margin.
Looking ahead, Wall Street anticipates that Alphabet's earnings will increase by 20% over the next 12 months. This current valuation of 24 times earnings appears quite reasonable, making a modest investment in this stock an attractive proposition.
Despite Ken Griffin's decision to sell Palantir's stock and invest in Alphabet, the finance world is still divided over the Twotech giants. Malik Ahmed Khan, an analyst at Morningstar, expresses concerns about Palantir's high valuation of 188 times adjusted earnings, despite its impressive business performance and potential in AI and big data. On the other hand, Alphabet's current valuation of 24 times earnings is seen as quite reasonable by Wall Street, given its strong third-quarter financial results and potential in AI cloud computing services, especially as it gains market share in this area. For those interested in investing, the disparity between the two stocks' valuations presents an opportunity for strategic financial decisions related to money and investing.
