What Happened:
Shares of data-mining and analytics company Palantir (NYSE:PLTR) jumped 5.1% in the afternoon session after the shocking 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. After the initial pop the shares cooled down to $21.51, up 4.9% from previous close.
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What is the market telling us:
Palantir's shares are very volatile and over the last year have had 48 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 18 days ago, when the stock gained 5.7% on the news that the company reported an impressive "beat and raise" quarter. Third quarter results beat both revenue and EPS estimates. In addition, gross margin improved, and the company continued to generate positive free cash flow. Looking ahead, the company raised full-year guidance for revenue and adjusted operating income, which exceeded Wall Street's expectations. Revenue guidance for the next quarter came in inline with expectations. Lastly, management noted that Palantir is now eligible for inclusion in the S&P 500. The S&P 500 is a widely followed index that tracks the performance of the 500 largest companies in the United States. Being included in the index means that Palantir will likely be held by many mutual funds and ETFs, which could potentially drive up demand for the stock. Zooming out, we think this was a decent quarter, showing that the company is staying on target.
Palantir is up 236% since the beginning of the year. Investors who bought $1,000 worth of Palantir's shares at the IPO in September 2020 would now be looking at an investment worth $2,260.
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