To The Moon

. News Popping. First it was $Microsoft(MSFT)$ and OpenAI, partnership that gave rise to ChatGPT. Then come, Microsoft and $Lumen Technologies(LUMN)$ partnership on the next generation of fibre optic cables to interconnect AI-enabled data centers on 01 Aug 2024. Even before the dusts have settled, another Microsoft partnership popped up again. Two of the most important names in artificial intelligence (AI) are joining forces. This time it is with Palantir. From The Beginning. The emergence and adoption of artificial intelligence (AI) has been the paradigm shift in business, as companies figure out how best to benefit from these next-generation algorithms. What sets generative AI apart from its predecessors is its versatility. These AI systems can be used to generate images, create stories, summarize data, and create presentations, all with a few simple prompts. Additionally, its ability to find patterns in data and streamline rote and time-consuming tasks is being heralded as the "fourth industrial revolution". This could dramatically alter how business gets done. Managers everywhere are working to secure their share of the potential windfall. Enterprise software and cloud titan Microsoft and AI & data analytics pioneer $Palantir Technologies Inc.(PLTR)$ have joined forces to develop cutting-edge AI solutions for the US government. (see above) Dynamic Duo ? In a press release on Thu, 08 Aug 2024 — Palantir & Microsoft announced an expansion of their existing partnership to "bring some of the most sophisticated and secure cloud, AI, and analytics capabilities to the US Defense and Intelligence Community." The goal of the partnership is to create a "first-of-its-kind, integrated suite of technology" featuring (a) Microsoft's Azure Cloud, (b) OpenAI services and (c) Palantir's Artificial Intelligence Platform (AIP) in the government's secure cloud. By joining forces, Palantir will deploy its products — Gotham, Foundry, Apollo, and AIP to Microsoft's Azure Government, Government Secret, and Top Secret Cloud platforms. Palantir will also adopt Azure's OpenAI service in these secure cloud environments. The resulting integrated solution will allow government users to build AI systems for a variety of applications, including logistics, contracting, prioritization, action planning, and more. What sets this agreement apart is the inclusion of Palantir's AIP. Management found that many users are reluctant to take the AI plunge because they simply don't know where to begin. The company began hosting boot camps or sessions that pair users with Palantir engineers to create these systems to solve real-world issues. The program has been wildly successful, with many customers signing sizable contracts within days or weeks of attending a boot camp session. That strategy could work equally well for government users. Winners’ Profile. Both Palantir and Microsoft have made a name for themselves in the fast-growing field of AI. (1) Palantir. Success of Palantir's aforementioned strategy has been evident in its recent earnings results. Palantir’s Q2 2024 revenue of $678 million grew +27% YoY. It reported a profit for the 7th consecutive quarter. But there’s more going on under the hood. PLTR's government projects’ revenue -- which tends to be lumpy -- grew +23% YoY. While its commercial contracts’ revenue grew +33% YoY, fueled by US commercial segment, that has become Palantir's fastest-growing business. It is now expected to grow at least +47% in FY 2024. AIP is the engine behind that growth. Palantir has also revealed it has hosted boot camps for >1,025 organizations over the past year, far exceeded the planned 500 companies. The results have been rewarding, as Palantir provided multiple examples of seven-figure deals signed within days or weeks of boot camp completion. This illustrated how successful this novel strategy has been. (2) Microsoft. On its part, Microsoft was quick to adopt generative AI and developed Copilot, a suite of AI-powered assistants designed to simplify and streamline time-consuming administrative tasks. In Q4 2024 (ended June 30), Microsoft said the number of people who use Copilot at work more than doubled QoQ. This helped fuel robust growth as revenue of $64.7 billion grew +15% YoY, while earnings per share (EPS) of $2.95 grew +10% YoY. Microsoft's biggest growth driver was its intelligent cloud segment, which grew +19% YoY and represents 44% of total income. At the heart of the segment is Azure Cloud, which grew +29%. MSFT also noted that eight points of that growth were the result of AI services. Microsoft also revealed that demand continued to outpace "our available capacity." Worthy mention - Microsoft's cloud growth continues to outpace that of its rivals, with much of the credit going to AI. Both Palantir and Microsoft are profiting from the massive opportunity of generative AI, while rivals lag behind. Game Changing Collaboration ? One of the more intriguing prospects of this partnership is the complementary capabilities of these two AI superstars and the large number of applications the collaboration will enable. Microsoft's government-approved secure cloud will play host to Palantir's decades of AI expertise and its cutting-edge AIP. Furthermore, Palantir's boot camp strategy might attract users and use cases that might otherwise be missed. Given their growth prospects and the opportunity to profit from AI, each of these stocks represents a compelling opportunity. Microsoft is currently selling for 30x forward earnings, just a slight premium to the multiple of 28 for the S&P 500. At 82x forward earnings, Palantir might seem prohibitively expensive, but those metrics don't take into account the company's accelerating growth. Using the forward price/earnings-to-growth (PEG) ratio provides a more accurate picture, revealing a multiple of 0.3 -- when any number less than 1 suggests an undervalued stock. This deal benefits both partners across the spectrum of their AI offerings. Microsoft gets to leverage Palantir's existing AI partnerships with US government agencies, while Palantir benefits from the expansion of those existing revenue streams, as well as the accelerated adoption of AIP within the defense and intelligence communities. As such, this deal could actually rise to the level of game-changer, but only time will tell. My viewpoints: (mine only !) After going through the post, I feel that Microsoft has more to gain in this collaboration, comparatively speaking. How so? From the passage, it seems the IT giant gained a step further into the inner sanctum of the US Defense department, as a result of the collaboration. It also cemented MSFT’s Azure cloud foothold in the US government arena, compared to $Amazon.com(AMZN)$ Web services and $Alphabet(GOOG)$ Cloud. I think PLTR does not need further proof that its products deliver results; otherwise the US government especially Defense would not work with them continuously. The only thing they need to show for is a sustainable growth in the commercial sector. When that is achieved, its stock price will soar without doubt. Are you sold on this tie up even before it shows sign of bearing fruits ? Must Read: Click on below titles to access. Give a like & help to repost ok. Thanks. CPI Cools but US Market didn't Rallies. Why ? Inflation reports help US Market recover fully ? Recession proof investments - Buy or Sell ? Do you think Microsoft has more to gain, like I do or it’s mutually beneficial ? Do you think regardless whether it is government or commericail , as long as it makes monies, its a good project ? If you find this post interesting, give it wings! ️ Repost and share the insights ? Do consider “Follow me” and get firsthand read of my daily new post. Thank you. @Daily_Discussion @TigerPM @TigerStars @Tiger_SG @TigerEvents