The Tech Stock That Looks Least Like a Tech Company

Bring up "Trump stocks" these days and software giant Palantir inevitably comes up. Investors in US equities know the name at least in passing — its performance in recent years has been jaw-dropping, though analysts have spent years hammering it for its sky-high P/E ratio-driven valuation. But like Tesla, getting hammered by analysts hasn't stopped the stock from repeatedly hitting new highs.

The Hardest Stock to Short — Not a Meme Stock, Yet It Rallies Even Harder Than One

Setting aside its eye-watering P/E ratio of roughly 400x, this isn't really a meme stock or a speculative flyer, because by every metric you'd use to measure a software company — and even by traditional fundamentals — Palantir looks genuinely excellent: a net margin above 40%, which is basically printing money. It joined the S&P 500 last year too, giving the stock's valuation a solid structural floor — no matter how high the valuation runs, it just won't come back down.

Palantir's origin story runs through arguably the sharpest investor Silicon Valley has ever produced (quite possibly not even "arguably") — Peter Thiel. In his landmark book Zero to One, Thiel makes a striking claim: his investment in Facebook alone made him nearly as much money as every other investment he's ever made, combined. His second-biggest return came from Palantir. In the post-9/11 climate of counterterrorism urgency, Thiel figured that the fraud-detection tools his team built at PayPal could be repurposed as intelligence tools to track down terrorists. So he brought in Alex Karp, now the company's CEO, and the two founded the company together.

Palantir stands apart from other Silicon Valley companies in that it committed to defense and public-sector work from very early on. Karp himself holds a PhD in philosophy rather than a technical background, setting him apart from most Silicon Valley founders. Today's Silicon Valley no longer shies away from defense tech, but back when Palantir was founded, during the Iraq War era, the Valley was drifting steadily leftward and treated defense work as something to avoid mentioning at all. Setting aside the past few years, America's broader climate over the last two decades has generally not favored Silicon Valley producing military-industry products. When Palantir first went out to raise money, most VCs weren't interested — a partner at top-tier VC firm Sequoia Capital reportedly sat there doodling in his notebook, visibly distracted, right in front of Karp.

That market didn't even really exist at the time. Back then, the US military trusted specialist defense contractors like Raytheon far more. A recent book, The Techno-Cold War, tells the story of how the US military and Silicon Valley slowly, painfully learned to collaborate — a genuinely difficult process of changing minds. Palantir's thinking, in that sense, was remarkably ahead of its time — most companies with that kind of foresight would have gone bankrupt several times over by now.

But Palantir executed on two strategies that led to its eventual success — strategies that likely couldn't have worked without Peter Thiel behind them.

The first was sheer, extraordinary patience, sustained over a very long time. That sounds like an obvious platitude, but their success genuinely depended on it. In the early days, their systems could only be sold to small military units and police departments, and the officers responsible for those purchases tended to hold relatively junior ranks. But as time passed, those same officers gradually rose through the ranks — and having already worked with Palantir's systems and come to trust them, that prior experience proved enormously helpful in winning broader military support down the line. Of course, this kind of patient strategy only works if Peter Thiel can raise enough capital to keep the company burning cash — fortunately for Palantir, that was never really a problem.

The second strategy was Thiel's extraordinary political capital, which gave Palantir the confidence to actually sue its own customers. Specifically, the company argued that the US military's procurement specifications were unfairly written, and pursued the matter through litigation. Normally, even if you win a lawsuit like that, you can't afford to alienate a customer that large — so no matter how unfair the situation feels, suing your own customer just isn't something you'd realistically do. But Palantir won its case, and the US military ended up changing its procurement rules as a result.

Backing Trump, Suing the Military — Rewriting the Rules of Defense Software

Part of what made Thiel's political capital so formidable is that, ahead of Trump's first election win, he was the lone prominent Silicon Valley figure publicly backing Trump. Thiel wasn't some redneck figure the left could dismiss — he was, if anything, the very embodiment of every elite credential imaginable, and the fact that a figure like that backed Trump before that first victory genuinely stunned people. And he didn't back Trump blindly either — he laid out a reasoned case for it, which reassured plenty of Trump supporters in turn. As a result, Trump owed him a considerable political debt — Thiel was even given a seat on the transition team. Backed by that kind of political weight, Palantir finally managed to crack open part of the long-standing monopoly held by the traditional military-industrial complex — at least on the software side, the door was finally open.

Coming back to the actual business: public-sector software is genuinely complicated, and security requirements run high, so Palantir isn't really selling "shrink-wrapped software" — it's more like a hybrid of subscription, operations, and hands-on deployment. The company insists on deploying its own engineers directly on-site with customers, which any systems integrator in Taiwan would probably respond to with, "isn't that just obvious?" — because in Taiwan, if you don't put your own engineers on-site with the client, you won't see a single dollar from them.

But in the 2010s, the dominant model for commercial software in the US was SaaS, and having large systems integrators deliver highly customized, ultra-responsive on-site implementation was expensive. Palantir, by contrast, leaned hard into putting engineers on the front lines of the business while minimizing its salesforce — a genuinely forward-looking bet at the time, and one that's since proven especially effective in the AI era, where this kind of deployment model has clearly demonstrated its value. Companies that can build faster than Palantir don't have its public-sector track record; companies with more public-sector experience than Palantir lack its speed and agility as a relative latecomer, along with its lighter technical debt. That sweet spot in between has become Palantir's core niche.

Since Trump's successful election win, Silicon Valley's right wing has effectively seized the dominant narrative in the business world — investing ahead of the curve in AI, using Silicon Valley tech to build the next generation of civil-military fusion defense products. There's enormous commercial opportunity emerging from all of this. If Sequoia Capital had actually invested in Palantir back then and held on through today, it could have seen a 1,000x return. But 21 years ago — who could have possibly seen that coming?