(PLTR), (AMZN), (MSFT), (GOOG)
Last weekend, I watched my daughter absolutely demolish me in a game of Go on her smartphone.
As I nursed my wounded pride with a cup of coffee, I couldn't help but smile - not because I lost, but because I remembered something remarkable that happened in 2016 that changed everything we thought we knew about artificial intelligence.
You see, back then, Google's (GOOG) AlphaGo made what became known as "move 37" against Go champion Lee Sedol. It was a move so bizarre, so seemingly nonsensical, that human experts thought it was a glitch.
Turns out, it was pure genius. That single move didn't just win a game - it showed us that AI could think in ways humans never imagined.
Fast forward to today, and I'm seeing something equally revolutionary happening in the AI space.
Just like AlphaGo's famous move, we're witnessing what I call the "chain-of-thought revolution," and it's about to reshape everything we know about AI investing.
Speaking of investing, Palantir (PLTR) has once again caught my attention lately, and not just because it's up 300% in 2024. There's something much bigger brewing here, and it reminds me of that pivotal AlphaGo moment.
Let me break down why this matters.
Remember how the later version of AlphaGo, called AlphaGo Zero, absolutely crushed its predecessor? Here's the kicker - it did it by completely ignoring human knowledge.
That means pure machine learning, no human training wheels needed. This isn't just some tech trivia - it's a blueprint for what's happening right now in the AI industry.
Through recent breakthroughs in what's called "chain-of-thought" processing and reinforcement learning (RL), we're seeing AI models that can actually improve themselves.
Think of it like a digital version of compound interest, but for intelligence. OpenAI's "o" series and DeepSeek-R1 are already showing us glimpses of this future.
Why is this important to us? Because we're approaching what AI researchers call a "hard takeoff" – a moment when AI capabilities could improve exponentially.
And just like buying Amazon (AMZN) in the early days of e-commerce, positioning yourself correctly now could be life-changing.
This brings us back to Palantir, which reported Q4 revenue of $828 million, up 36% year-over-year.
Their U.S. commercial revenue jumped 54%, and government revenue grew 45%.
But here's what really got my attention - they achieved this with a 45% adjusted operating margin. Now, that's the kind of margin most software companies only dream about.
The company is projecting $3.75 billion in revenue for 2025, representing 31% annual growth.
Sure, at $236 billion market cap and a P/E of 525, it looks expensive. But so did Microsoft (MSFT) when it first started dominating the PC market.
Here's why I think Palantir is uniquely positioned.
First, they've built what I call the "infrastructure for intelligence" - systems that can deploy these new self-improving AI models securely and at scale. It's like owning the railroad tracks during the steam engine revolution.
Second, their government contracts provide stable cash flow while their commercial business offers explosive growth potential. It's a rare combination that reminds me of early AWS.
Third, and most importantly, they're perfectly positioned to benefit from the chain-of-thought revolution. While others are still figuring out how to make AI work in the real world, Palantir already has the plumbing in place.
Now, let's talk risks because I've been around long enough to know nothing is a sure bet.
Competition is fierce - Microsoft, Google, and an army of well-funded startups are all fighting for a piece of the pie. The valuation is steep, and any slowdown in growth could hit the stock hard.
But here's what keeps me bullish: Unlike companies building the AI models themselves (which become commoditized quickly), Palantir operates on the application layer.
They're not selling picks and shovels during the gold rush - they're building the entire mining infrastructure.
Think about it this way: When I was learning to code in the early days of the internet, we were writing basic HTML.
Today, my kid who beat me at Go is creating AI agents that can write their own code. That's the kind of exponential progress we're seeing, and Palantir is right at the center of it.
At its current valuation, Palantir might look scary. But remember what happened when we doubted Tesla's (TSLA) valuation? Sometimes, the market prices in the future before most investors can see it.
Just like AlphaGo's "move 37" seemed crazy until it proved brilliant, investing in Palantir at these levels might seem nuts to some.
But when you understand the technological revolution happening under the surface - this chain-of-thought AI breakthrough combined with reinforcement learning - the potential becomes clear.
Just like in Go, sometimes the winning move in investing isn't the obvious one.
And right now, while others are still learning the rules of the AI game, I'm putting my money where my mouth is and making my move with Palantir on dips.
