Palantir TAM "North of $900B" -Alex Karp
Alex Karp in an interview with CNBC stated that the TAM for Palantir was “North of $900B”
Let's discuss, There are a few things here to analyze from this interview.
The past couple of months, Alex Karp has become very vocal around this idea that the United States has been innovating rapidly in technology and defense. I think there's two implications to why he's doing this. Number one, he wants to secure more governmental deals. By him talking very fondly of the United States government, frankly that is how you secure more deals.
Being at the forefront of technological innovation he's constantly reiterating this message to people that are listening. The United States is, and should be, the leader in software technological advancements.
In the context of mission critical situations and defense, he is really driving this point home.
The second thing he's talking about is Ukraine. He's making this argument here that American adversaries, like Russia and China, are starting to recognize that the United States is not just a hub of cultural information. Our main export is not just Hollywood. Rather we are actually at the cutting edge of technology.
Not just social technology, Facebook, Instagram, YouTube, (although we are arguably in the lead there as well) but rather technology that actually protects the articles of Liberty. As Karp puts it, the sovereignty that makes America so great.
The ability for us to understand that we are free, and with freedom we have the ability to pursue life, liberty, and The Pursuit of Happiness. Western ideals that are rooted within the fabric of our democracy are protected because we have the software and defense capabilities to protect.
How do we arrive at $900B
CNBC ran with this headline that the total addressable market for Palantir was North $900 billion. In the interview, Alex Karp said that the US spends $800 billion a year on software. That specifically the defense budget for the United States, Nothing else.
I think there's two levels here.
First, the government has about $800 Billion per year they're spending on defense. With the nature of the government spending here in the states, that number will only continue to climb.
If Panther were able to get even 5% of that 800 billion, that's a lot of money. Not to mention all the commercial sectors, or the international governmental deals they can get. They are working hard to get this UK NHS contract valued at 400 million pounds.
If they're able to get that contract then they become the central operating system for the NHS and it's a snowball effect for more and more deals.
Then there is the beast that is the U.S commercial sectors, which is growing 67% CAGR. Something Karp rides home about is that the US is the first to adapt. Enabling Palantir to get their foot in the door and showcase through example, how superior their products are.
Then we also have the international commercial market, which may be slower than the US, but is still a rapidly growing sector.
International government, you understand the point here.
All four of those opportunities, when you put those together, you get one very large pie. Not to get ahead of ourselves here, but 3, 5, 10 years from now once Palantir has actually established itself as a software prime. The pie is likely much larger than the $900B Alex KArp is claiming.
A 900 billion dollar TAM, they don't need to get all of that. The market cap is at $16 billion, they're going to do revenue of about $1.9 billion this year.
Are The Numbers Sandbagged?
Alex Karp always talks like the numbers Palantir gives out are sandbagged. When they say 30% CAGR, it's difficult to not try and read in-between the lines there to see that he personally believes that's too low. He's always talking as if this company should be 20 times bigger, explicitly has said this many times.
Especially with the geopolitical crises that are going on, Ai and warfare are becoming such a necessity based product. Governments need the company that is the best at delivering software. Palantir is the best at that by numerous reports. Just a question that they can execute now.
Palantir grew US commercial 102% in the past 12 months. Which really drives home his point from last October/November, that their commercial product is working. Foundry is something that American companies can adapt to and uniquely American companies are good at adapting.
Overall, not a bad interview by palantir's Alex Karp, I suggest you go take a listen.
At the end, he did speak to the stock price a little, stating that the commercial product was flying off the shelves, which is amazing to hear.
They're gonna put in about $1.9 billion this year, we'll see how Q4 goes, and the CEO seems very confident about the commercial product flying off the shelves.
Alex Karp and I agree, it's an undervalued company.
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