What Happened:
Shares of data-mining and analytics company Palantir (NYSE:PLTR) fell 8.2% in the morning session as stocks pulled back, and yields rose (leading to a bond selloff) after the S&P 500 reached a new high for the year in the final week of November 2023. Throughout 2023, major indices demonstrated robust performances, with the Nasdaq surging over 45% and the S&P 500 gaining 20% with a month remaining in the year. Investors may be asking if the market is getting ahead of itself. The Federal Reserve has been raising interest rates to combat inflation, and the latest data showed that their efforts may be paying off. As a result, there seems to be increased optimism in the market that because inflation is stabilizing, interest rates could stabilize or even move lower. The bullish sentiment could be shifting in the other direction, even if just for a short period. As a reminder, lower rates are good for stock valuations, especially for tech companies where the market needs to discount back cash flows further out in the future. When the math is done to discount these cash flows back to today, a lower assumed discount rate leads to higher present values.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Palantir? Access our full analysis report here, it's free.
What is the market telling us:
Palantir's shares are very volatile and over the last year have had 47 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 14 days ago, when the company gained 5.1% on the news that OpenAI's CEO Sam Altman is leaving the company. According to the Board, Altman's departure "follows a deliberative review process by the board, which concluded that he was not consistently candid in his communications with the board, hindering its ability to exercise its responsibilities. The board no longer has confidence in his ability to continue leading OpenAI." As a result, President and co-founder Greg Brockman announced that he's quitting OpenAI.
Subsequently, Microsoft CEO Satya Nadella revealed that Altman and his former OpenAI co-founder, Greg Brockman, are joining Microsoft to lead a new advanced AI research team. This move signals Microsoft's commitment to leading the rapidly growing AI market. The combination of Altman and Brockman's expertise with Microsoft's vast resources could create a formidable force in the AI space. This development shows that AI platforms could be potential acquisition targets of larger tech and internet companies that want to quickly add AI capabilities and talent.
Palantir is up 189% since the beginning of the year, but at $18.47 per share it is still trading 13.4% below its 52-week high of $21.34 from November 2023. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $1,944.
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