Bitcoin slumps as tech giant Palantir (PLTR) rallies to new highs — What gives?

Palantir Technologies (PLTR), a publicly traded North American company specializing in data analytics, made headlines after its stock surged to an all-time high of $109.60 on Feb. 6. The impressive 356% gain in 12 months outpaced the 121% rise in Bitcoin’s (BTC) price over the same period.

Investors are now questioning whether the tech company will continue to outperform Bitcoin and whether the factors driving the bullish momentum in Palantir’s shares remain intact.

Founded in 2003, Palantir has strong ties to government agencies, particularly the US Department of Defense and the Central Intelligence Agency. Palantir’s commercial offerings focus on supply chain logistics optimization and operational planning.

At least two Palantir co-founders are vocal Bitcoin supporters

Co-founded by entrepreneur and investor Peter Thiel, Palantir was funded through his venture capital firm, Founders Fund. Thiel is also known for co-founding PayPal, being the first outside investor in Facebook (META), and for becoming a public Bitcoin advocate in late 2017. In a CNBC interview, Thiel argued that the public had underestimated Bitcoin’s potential as a digital store of value.

Joe Lonsdale, another Palantir co-founder, stated in January 2024 that cryptocurrencies like Bitcoin and Ether (ETH) are likely to be used by artificial intelligence agents for financial transactions. Lonsdale also commented in a CNBC interview that “crypto could do very well” as a hedge against inflation.

Palantir’s recent success is attributed to the growth of its artificial intelligence platform, with fourth-quarter revenue rising 36% compared to 2023. Numbers released on Feb. 3 revealed a 45% operational margin, and its cash and equivalents position increased to $5.2 billion. Palantir shares have risen 36% since Jan. 29, leading to a record-high $245 billion market capitalization.

Investors seeking exposure to the AI sector may see an opportunity, as Palantir trades at a significant discount compared to Microsoft’s $3.1 trillion market value and Google’s $2.3 trillion. However, Palantir’s fourth-quarter EBITDA stood at $380 million, which is roughly equivalent to one day of revenue for Google’s parent company, Alphabet—making it 98.8% lower.

Palantir valuation holds a strong relation to Bitcoin

The connection between Bitcoin and Palantir may seem remote, but it’s hard to argue that the company offers real utility or dividend potential when its valuation is 162 times higher than its earnings before interest, taxes, depreciation, and amortization (EBITDA). In reality, much of Palantir’s value is based on speculation.

For comparison, Google trades at a 19.5x EBITDA multiple, while Microsoft trades at a 21.5x multiple. This gap could be justified if the market expects Palantir’s technology to drive earnings up by 8x over the next few years. However, it’s more likely that traders are overreacting to strong earnings momentum and are entering the FOMO territory with Palantir stock.

Investors often have short-term memories. Palantir shares dropped from $26.80 to $7 in just six months in early 2022. This 74% drop exceeded Bitcoin’s losses during the same period, but many traders consider the cryptocurrency market riskier. When considering more recent data, Bitcoin’s 60-day volatility is 44%, while Palantir’s volatility is 86%, meaning daily price fluctuations are lower for the cryptocurrency.

Related: Bitcoin reserves and sovereign wealth funds in the US, explained

Whether or not one believes Bitcoin should be valued as a scarce commodity rather than for its payment and data processing capabilities, Palantir’s valuation shows that investors are treating the stock market as a store of value, as its multiples are far above the typical range for the tech sector. 

Ultimately, both assets compete for the same investment capital, but only time will tell whether Palantir should be priced at 12.8% of Bitcoin’s $1.92 trillion market capitalization.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.