After taking the world by storm late last year, ChatGPT found yet another way to wedge itself in the center of the artificial intelligence (AI) arms race. ChatGPT's parent company, OpenAI, announced a new version of its flagship program aimed at enterprise businesses.
While the Microsoft-funded start-up has been consistently in the mix of companies disrupting the AI landscape, other names have quickly emerged as potential leaders as well. Namely, Palantir (PLTR 7.17%) witnessed a surge in demand for its newest development called Artificial Intelligence Platform (AIP).
Since AIP's release earlier this year, Palantir and its customers have been showcasing its success across publicized demonstrations. Nonetheless, OpenAI's ambitions as it relates to large enterprise customers come at an interesting time. Let's assess if OpenAI's latest technology is a rising threat to Palantir.
What is OpenAI's new product all about?
OpenAI claims that ChatGPT has been integrated in some form or fashion in more than 80% of the Fortune 500. While this may appear like some sort of ripple effect among the world's largest businesses, it would behoove investors to zoom out and think about this point on a deeper level.
Just because the application is in the majority of the Fortune 500, investors do not, and can not, know to what extent ChatGPT is being leveraged. While there is a high likelihood that many large corporations benefited from ChatGPT's capabilities, there is also a good chance many businesses tested the product and could not identify a mission-critical use case, thereby rendering the tool currently dormant.
Upon reading OpenAI's dedicated webpage about ChatGPT Enterprise, it seems to me that the new program is effectively a more advanced chatbot assistant than its predecessor. For instance, if you are a software engineer and need help finishing a line of code, some generative AI assistants can suggest how to complete writing your programming script. Along similar lines, Microsoft announced that it will be merging its AI capabilities into its suite of Office products as part of a new subscription program called Copilot.
While these applications have the potential to bring an entirely new layer of automation to the corporate environment, I am not yet convinced that ChatGPT Enterprise is a meaningful threat to Palantir.
Image source: Getty Images.
Palantir's AI roots go deep
Palantir spent nearly 20 years investing billions into research and development. Per its website, the company has four enterprise-grade software platforms: Apollo, Gotham, Foundry, and AIP. While the specific nuances of each program differ, the primary thread that is constant within Palantir's broader fabric is that artificial intelligence and machine learning are dominant components of the company's DNA.
To get an idea of how serious its technology is, consider that companies such as Cisco, Lockheed Martin, and Novartis are all leveraging Palantir across their organizations. Additionally, the company has strong ties to the U.S. government and some of its allies. For example, the U.S. Special Operations Command (SOCOM) chose Palantir in May as part of its AI strategy. This contract alone is worth up to $463 million across several years.
Instead of using AI for software code or spreadsheet automation, Palantir is being used to solve problems in logistics, pharmaceutical research, and military operations. Given the importance of these challenges, the company is able to command a meaningful price tag for its software. To put that into perspective, Palantir inked 66 total deals worth at least $1 million during the quarter ended June 30. Even more impressive: almost 30% of these were worth at least $10 million.
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Should Palantir investors be worried?
While ChatGPT Enterprise is in its early days, investors can come away with a few things to consider. First off, Palantir is not new to AI. The company spent two decades building out a sophisticated portfolio of intellectual property (IP) and is just now beginning to ramp up commercialization.
Palantir's last full year of financial data as a private company was 2019, during which it reported $743 million in revenue. Per its most recent guidance, the company expects revenue above $2.2 billion in 2023. Since going public in 2020, Palantir has nearly tripled its 2019 revenue. And according to some on Wall Street, this level of growth is not as impressive as it could be.
The second major takeaway is that, from my stance, ChatGPT Enterprise and Palantir may not be competing with the same customer cohorts. I think it's entirely possible that a Fortune 500 company or government entity could employ a combination of ChatGPT Enterprise and Palantir. However, I believe that the specific use cases or end goals for the products will be much different.
As of now, it does not look as if ChatGPT Enterprise is meant to be used in drastic scenarios such as military operations, as Palantir can be. Moreover, while AI assistants and large language models facilitate automation, I think the jury is still out on how influential they can be in more complex situations. Given the size and magnitude of Palantir's large, multiyear contracts, it's difficult to ignore the potential of the company. While ChatGPT will likely see popularity and generate meaningful business for OpenAI and Microsoft, I do not think it is a significant threat to Palantir at the moment.
