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“Explosive Growth: Could This 733% AI Stock Be Headed for a Split?”

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Palantir Technologies: A Potential Candidate for a Stock Split Amidst AI Waves

For its first few years as a public company, Palantir Technologies (NASDAQ: PLTR) faced significant challenges in gaining market share in the enterprise software market. The company’s sluggish growth and dependence on inconsistent federal contracts led many to view Palantir more as a government consulting firm than a serious software player.

However, on April 7, 2023, a pivotal investor letter from CEO Alex Karp transformed the company’s narrative.

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In this letter, Karp announced the upcoming launch of Palantir’s fourth major suite: the Artificial Intelligence Platform (AIP). Following this announcement, Palantir’s stock surged 733% (as of January 10).

This dramatic increase coincided with heightened interest in artificial intelligence among investors. However, it is important to note that Palantir is not just riding the AI trend. The company has demonstrated its ability to compete effectively against larger technology firms, showcasing the significant impact that AIP has had on its business.

Given the rapid increase in its stock price in under two years, Palantir might be an intriguing option for a stock split. Below, I will examine the reasons both for and against a potential stock split at Palantir.

Reasons Palantir May Consider a Stock Split

In recent years, large technology companies like Tesla, Nvidia, Apple, Amazon, Alphabet, and Broadcom have all executed stock splits. Each of these firms saw significant run-ups in their stock prices before splitting.

Palantir mirrors this trend; in 2024, its stock surged 340% making it the top performer in the S&P 500.

PLTR Chart
PLTR data by YCharts.

The chart reveals that Palantir’s stock experienced a substantial boost during the final months of 2024. Consequently, its valuation has stretched, potentially putting shares out of reach for smaller investors.

While stock splits do not change a company’s actual value, they often make shares seem more affordable. This perception can attract more buyers, thereby increasing demand and potentially raising the stock price further.

Moreover, a split would increase the number of shares available for trading, further enhancing liquidity.

Thus, making shares more accessible could improve Palantir’s market presence.

A gold coin split in half

Image source: Getty Images.

Reasons Palantir Likely Won’t Pursue a Stock Split Soon

In November, Palantir switched its trading exchange from the New York Stock Exchange (NYSE) to NASDAQ (NASDAQINDEX: ^IXIC).

This decision likely stemmed from how investors perceive the company. Some Wall Street analysts remain doubtful about Palantir’s long-term success. Listing on a tech-heavy index like the Nasdaq helps Palantir associate more closely with high-growth tech companies.

Additionally, it quickly became part of the Nasdaq-100 index, further increasing its visibility among institutional investors. As Palantir continues to prove its ability to generate steady revenues and profits, it has positioned itself as a notable player in the tech sector. Thus, the management may not prioritize a stock split just to enhance trading liquidity.

Conducting a stock split can also be resource-intensive for a company’s leadership. It requires board approval, and companies typically engage with investment banks and accounting firms to analyze the potential impacts of a split.

Despite being successful since launching AIP in April 2023, Palantir remains in growth mode. I believe management’s focus should be on expanding the company and increasing market share rather than getting sidetracked by the complexities of a possible stock split.

In summary, while the idea of a stock split is intriguing, it is likely a distraction for Palantir at this stage.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is also on the board. Adam Spatacco holds positions in Alphabet, Amazon, Apple, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Nvidia, Palantir Technologies, and Tesla. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

The views expressed here belong to the author and do not necessarily reflect those of Nasdaq, Inc.

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