In an era marked by escalating geopolitical tensions and rapid technological advancements, certain companies have gained prominence due to their strategic importance and innovative capabilities.
The ongoing conflicts in regions like Eastern Europe and the Middle East have underscored the need for advanced defence technologies, driving interest in companies that serve military and intelligence sectors. Simultaneously, the rise of artificial intelligence (AI) has captured the imagination of investors and technologists alike, as AI promises to revolutionise industries.
Palantir Technologies (NASDAQ: PLTR) stands at the intersection of these two powerful trends.
With its roots in providing critical data integration solutions to U.S. intelligence agencies, Palantir has expanded its reach to become a significant player in the commercial sector, particularly through its innovative AI-driven platforms. The company’s ability to blend cutting-edge AI technology with military-grade data processing capabilities has made it a standout in the market.
As geopolitical dynamics continue to evolve and AI advances further into mainstream applications, Palantir’s position as a leader in both arenas makes it a compelling subject for closer examination.
Who is Palantir?
Founded in 2003, Palantir Technologies began its journey by developing software solutions for the U.S. intelligence community, primarily to support counterterrorism efforts.
Over the years, the company has expanded its expertise to cater to a diverse array of commercial enterprises, offering solutions to complex data challenges that parallel those faced by government entities. Palantir has developed four principal software platforms—Gotham, Foundry, Apollo, and the Artificial Intelligence Platform (AIP). Gotham and Foundry enable organisations to integrate vast amounts of information into cohesive data assets, driving more informed decision-making. Gotham has been instrumental for global defence agencies and disaster relief organisations, while Foundry is increasingly becoming a central operating system for entire industries.
Apollo, introduced commercially in 2021, ensures the continuous operation of critical systems by managing software delivery, security updates, and platform configurations across any environment.
The company’s latest innovation, AIP, launched in 2023, integrates generative AI models and large language models with its existing platforms to operationalise AI within enterprise data environments. This innovation positions Palantir as a leader in enabling organisations to harness the power of AI while adhering to strict legal, ethical, and security standards. As Palantir continues to expand its market reach, it remains committed to forming long-term partnerships that transform how institutions leverage data in pursuit of their strategic goals.
Why is it popular?
Palantir has captured the attention of retail investors, largely due to its unique blend of military and AI associations.
Initially, Palantir’s reputation was built on its deep connections with the U.S. military and intelligence agencies. The company’s software has played a pivotal role in critical military operations, reportedly aiding inlocating Osama bin Laden. This strong military association provided the stock with a certain allure, particularly among investors interested in defence and security sectors.
In recent years, Palantir has successfully rebranded itself as a leader in AI, thanks to its AIP.
This shift has attracted a new wave of investors who see the company as a key player in the AI revolution. This transformation has fueled a significant rise in Palantir’s stock price, with the company seeing a remarkable 350%+ increase in its share price since 2023.
However, Palantir’s journey has not been without its challenges.
The stock was swept up in the meme stock frenzy of early 2021, with its price soaring to a peak of $45 per share, driven by retail investors on platforms like Reddit. This momentum was short-lived, as the broader tech sector faced a sharp sell-off. Palantir’s stock plummeted by 87%, hitting a low of $5.80 in January 2023. Despite this dramatic decline, the recent resurgence of AI-driven optimism has led to a strong recovery.
The question now is whether this AI-fueled momentum can be sustained, or if it represents another speculative phase in the stock’s volatile history.
Palantir will roll out its ‘Gotham’ software, which is designed to pinpoint targets on battlefields, on Microsoft’s Azure Government and Azure Government Secret clouds.
This makes Palantir the first to introduce Microsoft Azure OpenAI Service to classified settings, giving users access to AI language models like GPT-4. Palantir’s AIP aids in testing, debugging, and evaluating AI scenarios, enhancing its defence and intelligence applications. Yet, these uses require government authorisation.
This collaboration highlights Palantir’s strong bond with the US government, with over 40% of its revenue last quarter coming from government contracts.
Why should I care?
For markets: AI ventures take centre stage.
This major collaboration strengthens both companies’ positions in the growing market for defence-focused AI solutions. Palantir and Microsoft establishing themselves as key players in classified AI services could attract significant investments and drive market momentum.
Investors should watch for increased interest in firms innovating at the intersection of technology and government.
The bigger picture: Defence meets the future of AI.
This partnership signifies a broader trend of governmental adoption of advanced AI technologies.
Integrating AI into national defence strategies highlights the evolving landscape of military and intelligence operations. The move also shows the increasing reliance on private sector partnerships to enhance national security capabilities, setting a precedent for future collaborations in AI and technology sectors.
The TAMIM Takeaway
Palantir sits inside a compelling thematic, intertwining the worlds of military-grade data analytics and cutting-edge AI.
With deep-rooted ties to U.S. intelligence and defence agencies, Palantir has established itself as a key player in national security, while its recent ventures into AI have positioned it at the forefront of technological innovation. The company’s ability to seamlessly integrate AI into its existing platforms has not only attracted a strong following but also positioned it as a leader in the AI revolution. As geopolitical tensions rise and the demand for advanced defence technologies grows, Palantir’s strategic importance continues to increase.
This unique blend of AI and military applications makes Palantir a company to watch.
Disclaimer: Microsoft (NASDAQ: MSFT) is currently held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
Insurance might not be the most exciting sector, but for certain investors, boring is beautiful. The consistent cash flow, disciplined risk management, and long-term stability that well-run insurance companies provide are exactly what make them attractive in any market environment.
Tower Limited (ASX: TWR), though operating on a smaller scale, embodies these principles with its strong financial performance and strategic focus on innovation and efficiency. As an ASX-listed insurer with deep roots in New Zealand, Tower has recently upgraded its profit guidance, driven by improved claims performance and premium growth. This highlights the company’s ability to capitalise on market opportunities.
As Tower continues to innovate and optimise its operations, it stands out as a compelling investment opportunity within the insurance sector, offering a mix of stability and potential for growth.
Who is Tower?
Tower has a rich history that spans over 150 years.
Founded in 1869 as the Government Life Insurance Office, Tower has grown from a government-backed entity into New Zealand’s only Kiwi-owned and operated general insurer. The company’s deep roots in New Zealand are complemented by a strong presence across the Pacific, including Fiji, Tonga, Samoa, American Samoa, and the Cook Islands. Tower supports customers across diverse geographies with a comprehensive range of insurance products, including cover for homes, vehicles, contents, and businesses.
Tower’s evolution from a mutual association to a publicly listed company in 1999 listing on both the Australian and New Zealand stock exchanges in September 1999.
In November 2006, Tower’s New Zealand and Australian businesses were separated with the approval of its shareholders and the High Court.
As Tower continues to innovate, it remains focused on developing and providing market-leading benefits. The company’s commitment to growth and innovation positions it well for the future, as it continues to adapt to the evolving needs of its customers.
What’s Happened Recently?
We were particularly impressed by Tower’s strong first half results for 2024 reported back in May.
Underlying profit of NZD $36.6 million marked a significant turnaround from the previous period’s loss, driven by improved business-as-usual claims performance, premium growth, and enhanced operational efficiencies. The 20% increase in gross written premium (GWP) to NZD $291 million, alongside a reduction in the management expense, highlights Tower’s effective cost management and ability to navigate challenging market conditions. The company also announced a dividend of NZD $0.03 per share.
Another interesting marker to keep an eye on is the large weather events in New Zealand.
Most years, there are large weather events in the country which Tower provides for with a NZD provision of $45m. So far in 2024 (fingers crossed) there have been no major weather events hit New Zealand. With their financial year ending in September if there were nothing to occur over the next 2 months, that $45 million provision would be added back into the company’s profit and add $32 million after tax to the bottom line. Assuming this comes to fruition it would put the company on an earnings multiple of 5 which is much lower than the sector which trades on a multiple of around 12 to 13 times.
We also note that at the end of 2023 the company announced a strategic review.
Supported by its 20% shareholder Bain Capital, the review was put in place to explore options to optimise its capital structure and maximise value to Tower shareholders. What we like about this is the potential for corporate activity, particularly on the back of recent strong results.
Third Upgrade to Guidance
Tower recently announced upgraded profit guidance reflecting the company’s continued strong performance.
The insurer now anticipates an underlying net profit after tax (NPAT) exceeding $45 million for the financial year ending 30 September 2024, up from the previously projected $40 million. This marks the third upgrade to guidance since April.
The improved business-as-usual claims performance, driven by targeted underwriting actions and unusually mild weather in New Zealand, along with expected gross written premium (GWP) growth at or above the top end of the 10% to 15% range, reinforces our positive outlook on the company.
This updated guidance assumes full utilisation of the FY24 large events allowance which is conservatively set at $45m. As mentioned earlier, no large events have been recorded in the financial year to date. Any unused portion of the large events allowance at year end will increase underlying NPAT to improve the full year result.
Tower’s conservative approach to its large events allowance further strengthens its position, with potential for additional NPAT growth if large events remain absent.
The TAMIM Takeaway
Tower Limited’s combination of a rich heritage and forward-looking strategy positions it as a company to watch in the insurance sector.
The business’s recent run of strong financial results, supported by its upgrades to profit guidance, is an example of the company’s operational excellence and effective risk management. We are particularly encouraged by Tower’s disciplined approach to underwriting and cost management, which has not only improved profitability but also positioned the company to capitalise on favourable weather conditions this year. With a strategic review underway and there’s also potential for corporate activity that could unlock further value for shareholders.
Trading at a low earnings multiple compared to its peers, Tower offers a compelling blend of stability, growth potential, and value, making it an attractive investment opportunity in today’s market.
Disclaimer: Tower Limited (ASX: TWR) is held in TAMIM Portfolios as at date of article publication. Holdings can change substantially at any given time.
This week’s TAMIM reading list covers a diverse range of topics, from the rapid evolution of the EV industry to the financial risks of excessive leverage during market rallies. We explore the surprising psychological struggles of wealthy “tightwads,” the expanding health benefits of GLP-1 drugs like Ozempic, and the powerful networks shaping political landscapes. Additionally, you’ll find insights on essential investment strategies, the U.S. drone race, and the geek takeover of the Paris Olympics. Each article offers valuable perspectives on the forces driving change in our world today.
Welcome to this week’s carefully curated reading list, where we’ve mixed in a bit of everything to keep your mind sharp and entertained. From the Washington Post’s guide on keeping your data safe in a world that’s constantly trying to snatch it away, to Vox’s exposé on the oil industry’s dubious climate “solutions,” we’ve got your intellectual appetite covered. Ever wondered what happens when pallets disappear in the supply chain? The Wall Street Journal has the scoop with the ‘Pallet Detectives.’ Silicon Valley’s latest gamble on AI, PowerPoint’s unexpected rise in social circles, and Exxon’s near-miss with a trillion-dollar oil discovery are all here to spice up your reading. And for those who think the best ideas come while walking, HBR confirms it. Plus, don’t miss the BBC’s visual guide to the Olympics – a feast for your eyes. Dive in and enjoy the ride!
📚 Our data isn’t safe. Resist giving it up whenever you can(Washington Post)
📚 Oil companies sold the public on a fake climate solution — and swindled taxpayers out of billions (Vox)
📚 When This Supply-Chain Essential Goes Missing, It’s Time to Bring in the ‘Pallet Detectives’ (The Wall Street Journal)
📚 Silicon Valley’s Trillion-Dollar Leap of Faith (The Atlantic)
📚 Exxon Almost Walked Away From Its $1 Trillion Oil Discovery (Bloomberg)
As we stand on the brink of a new era, the wave of artificial intelligence (AI) investment is just beginning.
This transformative technology promises to revolutionise industries, reshape economies, and redefine the boundaries of human potential. For investors, the burgeoning AI landscape presents an unparalleled opportunity to capitalise on the next phase of innovation, much like the creation of the automobile and the internet before it.
Below we explore the major themes of this technological revolution, focusing on what we believe are the three overlapping sectors that unite around AI: Technology, Energy and Money.
Technology: The Backbone of AI Innovation
AI is only at the beginning of its journey, and we foresee four broad stages that will unfold as technology, energy, and money support growth and innovation.
Phase 1: Model Training
The initial phase of AI involves developing robust models capable of learning from vast amounts of data. This stage is exemplified by models like ChatGPT, which transform quality data into actionable intelligence. The rapid adoption of ChatGPT underscores the potential of AI; it reached 1 million users in just five days, a feat that took Netflix (NASDAQ: NFLX) 3.5 years to achieve. The focus in this phase is on creating foundational AI models that can process and learn from diverse data sets.
Phase 2: Edge Devices and Data Utilisation
In the second phase, significant advancements are made as major players like Apple (NASDAQ: AAPL) leverage AI, such as it’s planned Apple Intelligence, to gain a competitive edge through data and edge devices. This stage involves integrating AI into everyday devices, such as smartphones and wearables, to enhance their functionality. AI enables these devices to offer personalised experiences, process data in real-time, and improve efficiency. The synergy between AI and edge devices marks a critical step in making AI ubiquitous in consumer technology.
Phase 3: Application Proliferation
The third phase sees the widespread proliferation of AI applications and software across various industries. AI-driven solutions will become integral to business operations, healthcare, finance, and more. This stage focuses on developing specialised AI applications that cater to specific industry needs. The advancements in AI software will lead to more intelligent systems capable of performing complex tasks, automating processes, and providing insights that drive decision-making.
Phase 4: Tangible Innovations
In the final phase, AI will bring about tangible innovations such as robots, self-driving cars, and other autonomous systems. This stage represents the culmination of AI development, where the technology is fully integrated into society, transforming how we live and work. The deployment of autonomous systems will revolutionise industries by increasing productivity, enhancing safety, and reducing operational costs. AI’s impact will be felt across all sectors, driving significant economic and societal changes.
The Role of Semiconductors and Hardware Supply Chain
Semiconductors are the essential building blocks that enable AI to function, much like how the internet and cloud computing laid the groundwork for today’s digital world. The hardware supply chain for semiconductors, including the production of wafers, cables, sensors, and processing power, is critical for creating these four phases of AI development. As AI technology advances, the demand for high-performance semiconductors and other hardware components will surge, driving growth within the semiconductor industry.
Companies that specialise in these foundational technologies will play a pivotal role in supporting the AI revolution, ensuring that the necessary infrastructure is in place to sustain AI’s rapid development.
Energy: Powering the AI Revolution
The energy sector is both a beneficiary and a driver of AI innovation. AI technologies are optimising energy production, distribution, and consumption, leading to more efficient and sustainable practices. Nation-states increasingly recognise the importance of energy independence as a national security priority.
This surge in energy demand presents numerous opportunities in the build-out of electrical infrastructure. The adoption of electric vehicles (EVs), the expansion of data centres, and the growth of cryptocurrency mining are all contributing to this increased energy consumption.
Additionally, AI is revolutionising energy management through smart grids and data analytics, enhancing efficiency, reducing outages, and lowering costs for businesses and households.
Surge in Infrastructure Needs
As AI advances, the infrastructure required to support its power demands is surging. The proliferation of AI applications is driving a significant increase in electricity consumption, necessitating substantial upgrades to the electrical grid. This includes the construction of new power plants, the expansion of transmission networks, and the modernisation of existing infrastructure to handle higher loads and improve resilience. The rise of AI-driven industries such as data centres and EVs requires robust and reliable power sources. This growth in infrastructure development presents numerous investment opportunities in sectors related to power generation, grid management, and energy storage.
Optimising Renewable Energy Sources
The integration of AI in renewable energy sources like solar and wind is enhancing their efficiency and reliability. AI algorithms can better predict weather patterns and optimise the operation of renewable energy plants, ensuring maximum energy production. This not only makes renewable energy more viable but also supports global efforts to combat climate change. AI is being used to improve battery performance, predict maintenance needs, and extend the lifespan of energy storage systems. This is essential for ensuring a stable and reliable energy supply, particularly as the world transitions to more sustainable energy sources.
Smart Grids and Energy Management Systems
Smart grids, powered by AI, represent a significant advancement in energy distribution. These grids use real-time data analytics to balance supply and demand, prevent outages, and optimise the flow of electricity. This technology enables utilities to respond quickly to changes in energy consumption patterns and integrate renewable energy sources more effectively. For businesses and households, AI-driven energy management systems provide insights into energy usage, helping to identify areas for improvement, reduce waste, and lower costs.
Money: The Fuel for AI Growth
Investment in AI is crucial for its continued development and adoption. Financing this technology is expensive, and sovereign governments are increasingly providing the necessary financial resources. The United States, with its position as the global reserve currency, is in a powerful position to lead this investment. However, this dominance is being challenged by the BRICS nations (Brazil, Russia, India, China, and South Africa) and the increasing importance of gold.
AI is not just a technological advancement; it is a security issue. As such, AI will not be a luxury but a necessity. Governments recognise this and are ramping up their investments in AI research and development to maintain national security and competitive advantage. Public funding is being directed towards building the necessary infrastructure, such as data centres and high-performance computing facilities, which are essential for AI development. Additionally, governments are establishing frameworks and regulations to guide the ethical use of AI, ensuring that its deployment benefits society as a whole.
To hedge against financial uncertainties, traditional safe havens like gold and emerging assets like Bitcoin and other derivatives are being considered. These alternatives potentially provide a buffer against inflation and economic instability. Money is a critical component that pertains to all pillars of power, and they are all intricately interconnected. The strategic allocation of financial resources will determine the pace and direction of AI advancements.
This convergence of financial support will help overcome the substantial costs associated with AI development and ensure its integration into various aspects of society, ultimately fueling growth and technological progress.
The TAMIM Takeaway
The wave of AI investment is just beginning, and the opportunities it presents are vast and varied. It’s important to comprehend that AI and the opportunities surrounding it are still in their early stages. Patience is required, as the journey towards realising AI’s full potential will take time. While current big names in the industry may seem dominant, the future winners could very well be emerging companies that are not widely known today.
Investors should remain open-minded and vigilant, seeking out an understanding of less prominent smaller and mid-size players that are poised to become the next leaders in AI. By embracing the long-term view and understanding that the landscape will continue to evolve, investors can ride this wave of AI investment towards a future of unprecedented possibilities.
