Palantir investors: let's do a thought experiment!

Right now, PLTR's valuation sits around 90 times trailing revenues. Now, there is no longer any credible argument that it isn't a very good business. You don't grow at 30+ year over year with fantastic margins and tons of cash on the balance sheet without being a high quality company.

But let's do a comparison where we apply the same valuation multiple to the cloud businesses of Google and Microsoft. The comparisons are drawn because these are also segments growing consistently at around 30% per year with huge runways, dominant positions in AI, and have all said they literally could not keep up with demand in the previous quarters.

With a 90x sales multiple, you could completely gut Google's search business and youtube business, light that money on fire, and only value the entire company based on Google cloud. With the same valuation as PLTR is at right now, you would instantly double the size of Alphabet and turn it into the biggest company in the world at around a 4 trillion dollar market cap.

Let's do Microsoft. This one is a bit tougher because they don't break out the exact numbers that Azure does, but just leave it inside the intelligent cloud umbrella. That said, it's part of a 90-100B dollar segment, is growing at 30% and has an even bigger market share than Google cloud. So let's call it around a 60B per year run rate? If we applied the same method to Azure as we did to Google cloud, we could turn Microsoft into a bigger business than Amazon and Nvidia combined, while also lighting the other 60% of Microsoft's business on fire.

I'm not suggesting Palantir isn't a fantastic business with a long runway for growth. I am suggesting that the expectations for performance going forward for you to still earn a return are absolutely astronomical at this point.

Disclosure: Long Alphabet, no position in any other stocks discussed.