With a P/E of 530 its hard to imagine a better short opportunity in the market. As much as palantir likes to pretend its a software company it is a bespoke software company which has only slightly better scaling laws than a consulting company. Make no mistake I have the utmost respect (if fear is a form of respect) for their surveillance capabilities. But that doesn't justify the market cap.
At a certain point market flows tend to prop up big names, due to so much passive investing being market cap weighted. Those indexes are mostly blind and buy size for size's sake.
The Tesla example is probably a good base case to have. It has a mediocre outlook, extreme valuation, and is no longer minting millionaires, but it's also sort of a mediocre short. Big tends to stay big. (That is, unless capital flows reverse, ex: during the tariff scare, when international money was flowing out of the US for once. Then that same passive complex becomes a liability to those names that heavily lean on it).
The market itself is efficient, but the humans are often irrational.
Well, the efficient market debate tends to devolve into semantics somewhat. You are correct that passive investing is distorting the modern market and feeding on itself. It was originally designed to latch onto the consensus machine that is the market, but when the dominant participants are all passive, distortions occur.
What makes it difficult is that if you are, say, a short fund that is genuinely great at identifying overvalued companies trading far above their intrinsic value, you don't get rewarded from stepping in front of these flows. Every active manager who doesn't join in is fighting against a strong current, loses AUM, and even the active space converges with the passive space. This is a positive reflexive feedback loop, and it also shows up as a long-term megatrend (strong decade+ timeframe trend), which also brings in players like CTA/trend followers, and of course average retail investors, who are very trend sensitive.
In fact the efficient market has gotten increasingly good at boosting these forces in recent years, especially in the single name options space, index options space, and volatility complex spaces. Essentially, the modern market spends most of its time in a state where volatility is suppressed by dealers, and all informed market participants are incentivized to join in. It's a bit of a prisoner's dilemma situation. Then when enough pressure has built under the hood (in the volatility complex), there will be sudden, violent price discovery that overwhelms the passive flows, then everyone reshuffles their books, and the jaws lock down again until the next volatility breathing cycle. Then the financial news media will make a backwards looking narrative of the "cause" when it was in fact just a catalyst. It's an emergent, known cadence, but the specifics of it are unpredictable, because the catalysts that start each phase of the process are often unpredictable real world events.
To the index investor, it doesn't matter to them. Their capital will simply slosh from a trillion dollar TSLA to a trillion dollar NVDA or whatever the next boosted name is. They are not so much investing in the broad market as participating in some sort of strange liquidity simulation.
If I were to invest in a company named after a feared token from Tolkien, I'd rather invest in Anduril, at least they have scaling advantages due to primarily being a hardware company with good software to guide it.
> With a P/E of 530 its hard to imagine a better short opportunity in the market
Bitcoin has an infinite P/E.
Edit: P/E is also goofy for barely profitable companies. If you plot earnings on the x axis, P/E on the y, and hold price constant, you'll get a 1/x curve. It's not continuous at zero, and it ramps up quickly.
If Harris was president, this letter would probably say "We proudly support the future of American scholarship and inclusion over simple-minded emotional reactions".
My opinion: The dominance theme comes across as overwrought, and makes it difficult to read the other content in the optimal state of mind.
(Perhaps an LLMITM is crafting it as such?)
With a16z's ridiculous, "spiraling to infinity" press release, or more generally the business culture that appropriates from Jorge Luis Borges' works to justify immense profits, one could generally apply Hanlon's Razor to a degree. With this open letter, I don't see that at all. It emanates pure evil and megalomania.
"The United States is not, and should not be permitted to become, a soft compromise and amalgam of global values and tastes.
A reticence or perhaps incapacity to pronounce and to prefer, beyond the shallow and ritualistic shaming of others in the public sphere that masquerades as thought, has had costs.
A fuller statement of the causes and consequences of this reticence is set forth in The Technological Republic. In short, however, a tolerance of everything, a shallow embrace of all views and perspectives as equally valid, often and unfortunately devolves into a belief in nothing."
All that fluff as a verbal sleigh of hand to twist and reframe CS Lewis' treatise against moral relativism (which proposes as an answer an objective morality derived from the commonalities of global cultures' ethical systems that he calls the "Tao").
Remove the rest of the letter ("In The Abolition of Man...") from this hollow framing, and it would read like a screed against Palantir. Does he have a datacenter hooked up to CS Lewis' grave?
and also Tolkien obviously with the name of the company. I never understood the whole Peter Thiel LOTR-industrial-complex thing that makes a mockery out of the Christian universalism of Lewis and Tolkien. Thiel, Karp and the whole cohort all sound like Oswald Spengler, not like Lewis.
Hmm I didn't hear about this. Would mandating daily ketamine use for my cofounders improve our chances for success?
I believe most LLM's should at least be able to produce the same level of paranoid, *-pilled populist nonsense as in this investor letter. But it's just coming up with the ideas that's hard
Read so as not to be a fool, soon parted with it's money.
Note some current PE values...
NVIDIA PE: 57,33
Apple PE: 34,62
Microsoft PE: 37,18
Palantir PE: 527,52
The rest of letter, is a kind of anti-woke stance, billionaire victim complex so frequently seen now. Just positioning to align with current US political trends and secure government contracts, especially given Palantir heavy reliance on defense spending.
A letter to shareholder should assume that anyone who has some basic business sense should be able to understand it. I think Buffet says something along the lines that it should make sense to an average shareholder. To this end, the communication has to simplified to make sense.
But this letter in the last 5 paragraphs appears abstruse. What the heck is he trying to say ? It appears to me that the CEO is saying something that makes sense to the 5 friends he hangs out with at a silicon valley pub, ie witty, clever and cute. But not to the average shareholder.
Alex Karp knows that if you dont aggresively preempt criticism you risk being painted as the villain, so he sets the framing as "pro west" vs. "anti west". It's just a reframing of the capitalism vs communism justification for Vietnam in addition to the wide scale destruction carried out against Latin American democracies. if it looks like a spook, walks like a spook, and quacks like a spook, it's a spook. It wouldn't surprise me at all if Palantir was assisting with the CIA's more clandestine activities like funneling drug money and weapons to terrorist groups opposing inconvenient international leaders.
Nvidia and Palantir PE values are at least based on future expectations...
MS and Apple's are based on what? Their margins don't have much room to get better so to increase income by 3-4x they need to increase revenue by a similar factor. Which is hard to imagine.
Or we're just in an asset price bubble, which I think we are.
With a P/E of 530 its hard to imagine a better short opportunity in the market. As much as palantir likes to pretend its a software company it is a bespoke software company which has only slightly better scaling laws than a consulting company. Make no mistake I have the utmost respect (if fear is a form of respect) for their surveillance capabilities. But that doesn't justify the market cap.
At a certain point market flows tend to prop up big names, due to so much passive investing being market cap weighted. Those indexes are mostly blind and buy size for size's sake.
The Tesla example is probably a good base case to have. It has a mediocre outlook, extreme valuation, and is no longer minting millionaires, but it's also sort of a mediocre short. Big tends to stay big. (That is, unless capital flows reverse, ex: during the tariff scare, when international money was flowing out of the US for once. Then that same passive complex becomes a liability to those names that heavily lean on it).
I 100% agree with you, but at the same time that feels like a significant market inefficiency to me
The market itself is efficient, but the humans are often irrational.
Well, the efficient market debate tends to devolve into semantics somewhat. You are correct that passive investing is distorting the modern market and feeding on itself. It was originally designed to latch onto the consensus machine that is the market, but when the dominant participants are all passive, distortions occur.
What makes it difficult is that if you are, say, a short fund that is genuinely great at identifying overvalued companies trading far above their intrinsic value, you don't get rewarded from stepping in front of these flows. Every active manager who doesn't join in is fighting against a strong current, loses AUM, and even the active space converges with the passive space. This is a positive reflexive feedback loop, and it also shows up as a long-term megatrend (strong decade+ timeframe trend), which also brings in players like CTA/trend followers, and of course average retail investors, who are very trend sensitive.
In fact the efficient market has gotten increasingly good at boosting these forces in recent years, especially in the single name options space, index options space, and volatility complex spaces. Essentially, the modern market spends most of its time in a state where volatility is suppressed by dealers, and all informed market participants are incentivized to join in. It's a bit of a prisoner's dilemma situation. Then when enough pressure has built under the hood (in the volatility complex), there will be sudden, violent price discovery that overwhelms the passive flows, then everyone reshuffles their books, and the jaws lock down again until the next volatility breathing cycle. Then the financial news media will make a backwards looking narrative of the "cause" when it was in fact just a catalyst. It's an emergent, known cadence, but the specifics of it are unpredictable, because the catalysts that start each phase of the process are often unpredictable real world events.
To the index investor, it doesn't matter to them. Their capital will simply slosh from a trillion dollar TSLA to a trillion dollar NVDA or whatever the next boosted name is. They are not so much investing in the broad market as participating in some sort of strange liquidity simulation.
If I were to invest in a company named after a feared token from Tolkien, I'd rather invest in Anduril, at least they have scaling advantages due to primarily being a hardware company with good software to guide it.
But they aren’t public right? How do you invest in them?
> With a P/E of 530 its hard to imagine a better short opportunity in the market
Bitcoin has an infinite P/E.
Edit: P/E is also goofy for barely profitable companies. If you plot earnings on the x axis, P/E on the y, and hold price constant, you'll get a 1/x curve. It's not continuous at zero, and it ramps up quickly.
Alex Karp, Peter Theil, and Palantir are serious threats to american democracy and should be stopped.
Musk is definitely in their ring as well. https://en.m.wikipedia.org/wiki/Golden_Dome_(missile_defense...
If Harris was president, this letter would probably say "We proudly support the future of American scholarship and inclusion over simple-minded emotional reactions".
> But principal among them is our willingness to foster an unapologetically specific culture within this artist colony of a company
I hope he serves grilled cheese and Flavor Aid.
palantir would be putting rainbow heart stickers on their surveillance UIs if it meant another government contract back in 2023
My opinion: The dominance theme comes across as overwrought, and makes it difficult to read the other content in the optimal state of mind. (Perhaps an LLMITM is crafting it as such?)
Odd that Gemini claims to be unable to read it.
Hard to resist: that monologue was an excellent LARP. I want a dramatic reading version.
I nominate Jeremy Irons
A Snowden can’t root these mofos soon enough.
With a16z's ridiculous, "spiraling to infinity" press release, or more generally the business culture that appropriates from Jorge Luis Borges' works to justify immense profits, one could generally apply Hanlon's Razor to a degree. With this open letter, I don't see that at all. It emanates pure evil and megalomania.
"The United States is not, and should not be permitted to become, a soft compromise and amalgam of global values and tastes.
A reticence or perhaps incapacity to pronounce and to prefer, beyond the shallow and ritualistic shaming of others in the public sphere that masquerades as thought, has had costs.
A fuller statement of the causes and consequences of this reticence is set forth in The Technological Republic. In short, however, a tolerance of everything, a shallow embrace of all views and perspectives as equally valid, often and unfortunately devolves into a belief in nothing."
All that fluff as a verbal sleigh of hand to twist and reframe CS Lewis' treatise against moral relativism (which proposes as an answer an objective morality derived from the commonalities of global cultures' ethical systems that he calls the "Tao").
Remove the rest of the letter ("In The Abolition of Man...") from this hollow framing, and it would read like a screed against Palantir. Does he have a datacenter hooked up to CS Lewis' grave?
>hand to twist and reframe CS Lewis
and also Tolkien obviously with the name of the company. I never understood the whole Peter Thiel LOTR-industrial-complex thing that makes a mockery out of the Christian universalism of Lewis and Tolkien. Thiel, Karp and the whole cohort all sound like Oswald Spengler, not like Lewis.
[dead]
This reads like a Bryce P. Tetraeder quote
Like him or hate him, he has an ethos. /s
That was very funny. I enjoyed reading it. Thanks for sharing.
Is all of Silicon Valley on ketamine?
Hmm I didn't hear about this. Would mandating daily ketamine use for my cofounders improve our chances for success?
I believe most LLM's should at least be able to produce the same level of paranoid, *-pilled populist nonsense as in this investor letter. But it's just coming up with the ideas that's hard
absolutely. you should watch the new south park episode its hilarious
With less fluff, a report on the economics of Palantir by Citron Research:
https://citronresearch.com/wp-content/uploads/2025/08/OpenAI...
Read so as not to be a fool, soon parted with it's money.
Note some current PE values...
NVIDIA PE: 57,33
Apple PE: 34,62
Microsoft PE: 37,18
Palantir PE: 527,52
The rest of letter, is a kind of anti-woke stance, billionaire victim complex so frequently seen now. Just positioning to align with current US political trends and secure government contracts, especially given Palantir heavy reliance on defense spending.
A letter to shareholder should assume that anyone who has some basic business sense should be able to understand it. I think Buffet says something along the lines that it should make sense to an average shareholder. To this end, the communication has to simplified to make sense.
But this letter in the last 5 paragraphs appears abstruse. What the heck is he trying to say ? It appears to me that the CEO is saying something that makes sense to the 5 friends he hangs out with at a silicon valley pub, ie witty, clever and cute. But not to the average shareholder.
Alex Karp knows that if you dont aggresively preempt criticism you risk being painted as the villain, so he sets the framing as "pro west" vs. "anti west". It's just a reframing of the capitalism vs communism justification for Vietnam in addition to the wide scale destruction carried out against Latin American democracies. if it looks like a spook, walks like a spook, and quacks like a spook, it's a spook. It wouldn't surprise me at all if Palantir was assisting with the CIA's more clandestine activities like funneling drug money and weapons to terrorist groups opposing inconvenient international leaders.
Nvidia and Palantir PE values are at least based on future expectations...
MS and Apple's are based on what? Their margins don't have much room to get better so to increase income by 3-4x they need to increase revenue by a similar factor. Which is hard to imagine.
Or we're just in an asset price bubble, which I think we are.
MS and Apple PEs are based on stability. They’ll manage better than most to preserve their stability in all of the randomness ahead.
Palantir’s is based on the probability things get worse and they get more government contracts. In fact, it’s a bet on how much worse things can get.
> MS and Apple PEs are based on stability.
Definitely not how equities are priced.
I wasn't proposing a rational technical analysis view...
Apple spends a lot on buybacks so future expectations of them maintaining current margins might be sufficient