Palantir's impressive results are making the rest of the software sector look bad. Markets could do with a few more artificial-intelligence success stories this earnings season if investors are to buck their worries about the AI trade.
The data-analytics company's revenue growth outstripping peers is hardly a surprise by now. The key was the commercial revenue more than doubling, showing it isn't reliant on lumpy government contracts. That makes it the rare software company that can point to unambiguous independent AI success.
AI has a big software problem. No matter how many partnerships the likes of Salesforce and ServiceNow sign with OpenAI and Anthropic, they can't soothe shareholders' fears that they are paving the way for their own replacements. So money is fleeing from software -- a sector populated by public companies with traditionally high margins and deep moats -- to AI model providers, an area dominated by lossmaking private companies engaged in cut-throat competition.
Figuring out how to invest in such a market is tricky. Just look at Elon Musk's merger of his SpaceX and xAI companies. The combined company is valued at $1.25 trillion, with AI company xAI comprising $250 billion of that, according to The Wall Street Journal. Even if an investor is tempted by Musk's vision of data centers in space, it's not easy to figure out how to get exposure or what price to put on the component parts. Musk's previous combinations of SolarCity with Tesla and X -- formerly Twitter -- with xAI point to a checkered history of value creation via mergers.
Until now, chip companies have been the favored play on the growth of AI. But semiconductor makers and their customers are increasingly entwined. See for example Nvidia, which acts as both supplier and investor for OpenAI and Anthropic -- leading to a tricky dance between the parties as they jostle for commercial advantage while avoiding an open breach that would panic investors.
Palantir's clean AI growth story is so rare that it commands a sky-high price-to-earnings ratio. Investor appetite for alternatives is there, if any other company can step up to the plate this earnings season.
-- Adam Clark
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Palantir's Quarterly Revenue Exceeds $1 Billion Amid AI Surge
Palantir, the data analytics company, handily beat expectations for the December quarter and is forecasting 2026 revenue significantly above Wall Street targets. CEO Alex Karp says financial results are exceeding even their most ambitious expectations amid strong AI demand.
-- Fourth-quarter revenue jumped 70%, to $1.4 billion and adjusted earnings
were 25 cents a share. Sales in the U.S. market rose 93% from a year ago,
with commercial revenue up 137%. Sales to the U.S. government rose 66%.
-- The company's roots are in intelligence and defense work, and Palantir
has seen an acceleration of its already extensive contracts with the U.S.
federal government. Most recently, in December, the company announced a
new contract with the U.S. Navy, valued at up to $448 million.
-- But Palantir has expanded beyond its government roots as large companies
struggle to manage and interpret the seas of data they produce every day.
This may be Palantir's biggest opportunity, because all large data-rich
organizations can benefit from its software. The U.S. is again the core
market here.
-- Few analysts doubt that Palantir has a long runway for commercial success,
but there is concern surrounding its valuation. At a forward
price-to-earnings multiple of about 145, it is among the most richly
valued stocks, though still behind Tesla's 206 multiple.
What's Next: Palantir sees 2026 revenue rising 61%, to a range of $7.18 billion to $7.198 billion as commercial revenue is forecast to more than double. For the current quarter, Palantir sees revenue of between $1.53 billion and $1.536 billion.
-- Adam Levine and Liz Moyer
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Elon Musk Combines SpaceX and xAI in Data Center Move
Elon Musk's SpaceX announced it has acquired his artificial intelligence firm xAI ahead of a potential midyear initial public offering of SpaceX stock. The idea, once seemingly far-fetched, is all about AI. SpaceX is planning to raise capital to expand its AI ambitions, including building data-center capacity in space.
-- SpaceX recently filed an application to build a "space cloud" of up to 1
million satellites. That's roughly 100 times the scale of its space-based
broadband product, Starlink. It would harness the sun's energy and the
cold vacuum of space to free AI computing from Earthly electricity supply
and cooling.
-- Musk's AI firm has been valued at $200 billion in recent funding rounds,
while SpaceX is reportedly seeking an IPO valuation as high as $1.5
trillion. That would value SpaceX at roughly 60 times estimated 2026
sales. Bloomberg reported the combined valuation of SpaceX-xAI at around
$1.25 trillion.
-- The combination could boost Tesla's stock if it drives hopes of
convergence among Musk's various companies. Tesla's fourth-quarter
earnings call focused heavily on AI-linked opportunities, including
robo-taxis and humanoid robots, while it is scaling back its EV product
line.
-- In a blog post announcing the merger, Musk said SpaceX acquired xAI to
form an ambitious vertically-integrated innovation engine on (and off)
Earth, "scaling to make a sentient sun to understand the Universe and
extend the light of consciousness to the stars!"
What's Next: SpaceX has already invested $2 billion in xAI, and last week Musk's Tesla said it was investing the same amount. The merger is a share exchange, The Wall Street Journal reported, citing the review of company emails. The report said employees will have the option to sell their xAI shares back to the company.
-- Al Root and Liz Moyer
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Trump's Strategic Mineral Stockpile Aims to Cut China Reliance
President Donald Trump is launching a $12 billion program to stockpile strategic critical minerals, calling it Project Vault, as he advances his effort to reduce the U.S.'s dependence on Chinese supplies. Announcing it from the Oval Office, Trump compared it to the nation's Strategic Petroleum Reserve.
-- Rare earths are essential for manufacturing everything from iPhones to
F-35 jets, and China currently dominates the market with an estimated 85%
of global processing capacity. The stockpile could help manage prices by
smoothing out commodity cycles for mining companies.
-- The plan includes about $1.7 billion in private capital and a $10 billion
loan from the Export-Import Bank, which called it a supply chain security
initiative. Storage facilities will be across the U.S., the bank said. It
has initial participation indications from GE Vernova, Western Digital,
Boeing, and others.
-- Suppliers servicing the vault are trading firms Hartree Partners,
Mercuria Americas, and Traxys, the bank said. The administration has made
other investments, including a $1.6 billion commitment to USA Rare Earth,
which is developing a Texas rare-earth mine. That deal includes $1.3
billion in loans through the Chips Act.
-- The Defense Department struck a deal with MP Materials, the largest rare
earth producer in the Western Hemisphere, including equity. MP Materials
produces minerals used for EVs, drones, robots, and defense firms.
Project Vault is expected to include such minerals as gallium and cobalt,
too.
What's Next: Secretary of State Marco Rubio has invited delegations from 50 countries to an event at the State Department on Wednesday aimed at advancing collective efforts to strengthen and diversify critical mineral supply chains. He will be joined by Vice President JD Vance and White House advisor David Copley.
-- Al Root and Janet H. Cho
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Oracle Tests Investors' AI Appetite With $50 Billion Fund Raise
Oracle plans to raise between $45 billion and $50 billion this year as it looks to fund its huge bet on cloud computing to power artificial intelligence. About half of the plan involves debt, which will be a test of the market's appetite for AI-linked borrowing. Oracle had about $100 billion in long-term debt as of November.
-- Proceeds from the fund-raising will be used for the Oracle Cloud
Infrastructure business. Oracle is raising money to build additional
capacity to meet the contracted demand from customers including OpenAI,
Meta Platforms, Advanced Micro Devices, Nvidia, TikTok, xAI, and others.
-- Oracle's hefty borrowing has turned its debt into a barometer of market
belief in the sustainability of the AI surge, with prices to insure
against a default hitting their highest since the 2008-09 financial
crisis. It costs $153.90 a year to insure $10,000 of Oracle debt, up from
around $40 last July.
-- Oracle said it aims to maintain an investment-grade balance sheet.
Credit-ratings firms S&P and Moody's have both issued negative credit
rating outlooks for Oracle in recent months, citing the effects of
building cloud infrastructure on its free cash flow.
-- The company said it plans a balanced combination of debt and equity
financing. Oracle plans to raise approximately half of its 2026 funding
through a combination of equity-linked and common equity issuances.
What's Next: Jefferies analysts wrote that investor sentiment should improve if Oracle can deliver on contracted AI demand this year, though it will likely need to raise more funds in 2027 and beyond because free cash flow isn't expected to turn positive until 2029.
-- Adam Clark and Janet H. Cho
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