Since Donald Trump was declared president-elect, the S&P500 (SNPINDEX: ^GSPC) is up about 2%, while the Nasdaq Composite (NASDAQINDEX: ^IXIC) has increased by about 5%. At a high level, these moves indicate that stocks have broadly moved higher over the past month.
However, two stocks that have been moving in opposite directions since the election are government advisory operations Booz Allen Hamilton (NYSE: BAH) and enterprise software company Palantir Technologies (NASDAQ:PLTR).
Since November 6, Booz Allen shares are down about 25%, while Palantir shares are up almost 40% (as of market close on December 13).
But in early December, Booz Allen and Palantir announced a strategic partnership that could be a gamechanger for both companies. Let’s explore how the two companies are working together and what it could mean for long-term growth for each business as the age of artificial intelligence (AI) continues to unfold.
One of Trump’s campaign promises was the creation of a new government agency that would focus on identifying and cutting excess budget spending to improve the federal budget deficit. Since Booz Allen is a consulting firm that works closely with the government, the stock sell-off was likely driven by investor panic that business for the company would suffer as the budget initiative puts a stricter eye on government projects.
In contrast, Palantir already has an existing footprint with the US government – especially the Department of Defense (DOD). For the nine months ended September 30, Palantir generated $1.1 billion in revenue from its public sector operations – up 24% year over year and accounting for approximately 55% of the company’s total revenue base.
Given the increasing focus on national security amid geopolitical turmoil in Eastern Europe and the Middle East, combined with the military’s increasing focus on artificial intelligence, it’s not surprising that Palantir’s stock has seen a post-election jolt of got investor enthusiasm.
Although Palantir is considered a high-quality software developer, it is important to understand that integrating the technology can often be a complex and time-consuming endeavor. In general, software companies may have a professional services team that helps new customers implement their new tools in a seamless, efficient manner so they can address issues and identify use cases.
I see the collaboration between Palantir and Booz Allen as an extension of that idea. While Palantir specializes in AI software applications, Booz Allen has the expertise needed to integrate these tools into niche, complicated environments such as those found in the defense industry.
By focusing on “information infrastructure modernization,” Booz Allen and Palantir are attempting to increase the pace at which military operations are conducted in the AI era.
I see the deal between Booz Allen and Palantir as mutually beneficial, and one that could be a game changer for both companies.
For Booz Allen, I think the company quickly found a way around a potential slowdown in its operations, given the microscope on the national budget. Furthermore, by working specifically with Palantir, Booz Allen has figured out a way to leverage the AI story. This step is quite similar in some ways Accenture‘s partnership with Nvidia. My larger point here is that consulting organizations are positioned to play a major role in AI implementation in the coming years, which is why I’m encouraged by Booz Allen’s ability to get involved in the movement.
For Palantir, I think the obvious benefit is that the partnership with Booz Allen could represent a new form of lead generation and help accelerate government operations. Historically, deal flow in the public sector has been lumpy and unpredictable. However, I think Palantir has done a respectable job of identifying new ways to become more involved with the US government beyond bidding for large-scale defense deals.
The partnership between Booz Allen and Palantir is a win-win scenario and I’m curious to see how the partnership pays off as the AI story continues.
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Adam Spatacco has positions at Nvidia and Palantir Technologies. The Motley Fool holds positions in and recommends Accenture Plc, Nvidia, and Palantir Technologies. The Motley Fool recommends Booz Allen Hamilton and recommends the following options: long January 2025 $290 calls on Accenture Plc and short January 2025 $310 calls on Accenture Plc. The Motley Fool has a disclosure policy.
Is Palantir’s deal with Booz Allen a game changer? was originally published by The Motley Fool
