- Palantir stock has shed nearly 9% so far this week.
- PLTR stock is sitting right on medium-term support from $13.50 to $14.
- A break of $13.50 would send PLTR hurtling toward $10.25.
- A recent AIP conference gave Palantir good marks on its move into the LLM space.
Palantir (PLTR) stock is down 8.7% so far this week ahead of the Friday opening bell. Tech stocks like Palantir fared poorly after the Federal Reserve on Wednesday said it was still open to further rate hikes later this year and that 2024 would probably see a slower rate-cutting timeline.
Palantir stock dropped 2.7% on Wednesday and then another 5% on Thursday as the growth-focused NASDAQ 100 experienced its worst week thus far since early March.
Palantir stock news: All downhill since Morgan Stanley downgrade
It has nearly been a month, but looking back on the September price chart, it appears that the dream ended for Palantir traders when Morgan Stanley downgraded PLTR to underweight on August 31. Palantir stock traded down 8.3% in that session.
While bulls have tried their best to relaunch the May through July rally that pushed PLTR up to $20, September saw the secondary rally lose interest at $16. Morgan Stanley’s main point with their downgrade note, to which they attached a $9 price target, was that most of the near-term upside was already baked into the share price.
Palantir is – even now following the share price pullback of late September – valued at 61 times forward earnings. This valuation profile mixed with a lack of certainty over profitability from Palantir’s much-hyped Artificial Intelligence Platform or AIP gives Palantir a poor risk/reward profile, according to Morgan Stanely’s coverage update.
AIP is Palantir’s answer to ChatGPT. It is a large language model (LLM) that Palantir has begun offering its clients who want to integrate a self-branded chatbot for customers. Palantir management, however, has been tight-lipped about how AIP will add to the bottom line.
The rest of Wall Street does have a broadly positive read on AIP however. Palantir held a special conference for AIP last week, and the reviews from analysts were largely exemplary.
Wedbush Securities’ Dan Ives, who has a $25 price target on PLTR stock, wrote, “Overall, we believe Palantir is on the golden path for [AIP’s] monetization story on the commercial side and is well-positioned to capitalize on the strong commercial spending tailwinds into 2H23/2024.”
Last week, Palantir announced one successful instance of its AIP rollout. The artificial intelligence (AI) company signed a deal with the UK defense firm Babcock International Group.
“The partnership will leverage Palantir AIP, the AI-enabled instance of the company’s software, that will aim to transform how the Babcock workforce captures, integrates, models and builds data-driven solutions,” Palantir said in a statement.
AI stocks FAQs
First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.
There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.
Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.
Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.
Palantir stock forecast
Palantir stock is sitting directly on top of medium-term support that the market has not traded below since May 26. Roughly speaking, this is the $13.50 to $14 demand range. This support band reinforced PLTR price on several occasions in June and August.
Shareholders will hope it works here again since Palantir stock closed at $14 on Thursday. If not, traders can expect PLTR to crater quite quickly to $10.25, a level that saw resistance in February and May of this year and would now be expected to transform into support.
The 9-day Simple Moving Average (SMA), however, is still slightly above its 21-day SMA counterpart, so the odds are still in its favor to hold the line at the $13.50 to $14 range.
PLTR daily chart
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