This AI Company Is the S&P 500’s Best-Performing Stock in 2024 (Hint: It’s Not Nvidia)

On December 26, 2024By Littum

Upper line

The best-performing stock on the S&P 500 this year isn’t Nvidia or Tesla, but rather another, more under-the-radar name benefiting from the artificial intelligence gold rush: Palantir Technologies, the data-hungry defense contractor run by eccentric billionaire Alex Karp.

Palantir stock’s 2024 surge coincided with an AI boom.

AFP via Getty Images

Key facts

Palantir is the best-performing stock on the S&P in 2024, with a 369% year-to-date return through Monday.

Although Palantir only listed in September on the S&P, the most commonly cited U.S. stock market benchmark that covers 500 of the most valuable companies across industries, much of its gains have come over the past three months.

In addition to a bump from the broader Wall Street frenzy for AI names, Palantir stock has gotten a massive boost from optimism on increased defense spending under the incoming Trump administration, with Palantir shares up 58% since Election Day.

Its 166% gain since the S&P announcement is easily the strongest return of any S&P company during that period, according to FactSet.

Palantir’s rise sent its market capitalization from $37 billion to about $180 billion, a ninefold increase from the $20 billion valuation it achieved in its 2020 IPO.

Nvidia is the top-performing S&P constituent listed on the index for the full year, as the primary architect of the semiconductor technology that powers generative AI surged 172%.

Key

Palantir is 2024’s third-best performing stock of any public company valued at least $50 billion regardless of S&P status, trailing only marketing software company Applovin (756% gain) and bitcoin hoarder MicroStrategy (477%).

What does Palantir do?

Palantir uses AI-powered analytics to deliver big data solutions. The company is “the beneficiary of rapidly growing demand for artificial intelligence (AI) platforms in both commercial and public end markets,” Bank of America analyst Mariana Perez Mora explained in a note to clients earlier this year. Palantir is perhaps most famous for its work as a contractor for the Department of Defense, but its customers are too include such as General Mills and United Airlines. Government contracts accounted for $408 million of Palantir’s $726 million in third-quarter revenue.

Surprising facts

Quarterly revenue of less than $1 billion may seem odd for a company worth more than $150 billion, and for good reason. Palantir is by far the most expensive stock on the S&P based on its price-to-sales ratio, a measure that compares companies’ trailing 12-month earnings to market capitalization. Palantir’s 67 price-to-sales ratio is nearly double that of the next closest company, Texas real estate giant Texas Pacific Land Corporation at 37, and it’s more than 20 times higher than the S&P media’s price-to-sales ratio of 3. But Palantir’s “dominant position on the AI-driven software market … should support revenue growth and improve earnings,” predicts Perez Mora.

Contra

A Wall Street favorite for its high profit margins and top-notch technology, Palantir is not without its controversies. The company came under fire from human rights groups for its involvement with Immigration and Customs Enforcement prior to its IPO with Palantir data connected to raids on people living illegally in the United States. Carp said in 2020, his company’s analytics have helped ICE find “people in our country who are undocumented,” adding that he sympathized with “the legitimate concern about what’s happening at our border, how it’s happening, and how .. . enforcement looks.”

Forbes valuation

Karp, Palantir’s co-founder and CEO, is worth about $7.5 billion, placing him among the world’s 400 richest people. Another co-founder, Peter Thiel, is the 148th richest person with a fortune of $15 billion, while the other two co-founders Stephen Cohen and Joe Lonsdale officially joined the billionaire ranks last month.

Key

Carp describes himself as a supporter of “populist-left politics” and endorsed Vice President Kamala Harris in the November election, but his co-founders Lonsdale and Thiel are among the most prominent banking roles in right-wing politics. “Father’s Home,” celebrated Lonsdale after Donald Trump’s victory in November, while Thiel has donated tens of thousands of millions of dollars to Republican causes over the past decade. “Because Peter had endorsed Mr. Trump, it was actually harder to get things done” at Palantir, Karp told New York Times this summer on Thiel’s public embrace of Trump in 2016 (Thiel did not endorse a candidate this cycle).

Crucial quote

“It’s a rare cult with no sex and very little drugs, and we don’t poison anybody,” Karp told hedge fund billionaire Stanley Druckenmiller during a discussion at a JPMorgan Chase event earlier this month, citing Palantir’s close-knit culture.