Palantir reported after the close.

Revenue was up 93% from a year ago. Net income was up three-fold from a year ago ($1.07 billion, against $329 million).

Adjusted operating margin came in at 62%. So, add that to 93% growth and you get a Rule of 40 score of 155.

That said, this is a stock that was trading down 29% on the year into today’s close (35% below its all-time highs), just prior to the earnings release. 

And now we know the company grew faster in the recent quarter, became a more profitable business, and raised the outlook. 

The decline in the stock was not related to the business. It was about market positioning.

That has been the theme for AI stocks all summer. And it’s a gift.

Why? It’s in Elon’s post this morning. 

This chart describes the “singularity curve.” In singularity, AI capabilities broadly exceed human intelligence, and can rapidly self-improve.

Progress stops feeling linear and starts feeling vertical. So, the change is no longer a little better every year. More like: the world changes fast enough that the old way of thinking breaks.

Elon said months ago that we are there.

AI understands its own code and hardware. It begins rewriting its own software more efficiently. The progress accelerates because it can rewrite itself faster and more effectively than before. The cycle repeats exponentially, leading to a massive and accelerating leap in capability.

And the next phase, robots.

Models self-improving, leads to robots building robots (self-improving), which leads to machines doing physical work. And that will effectively create unlimited labor, and therefore, ultimately, a limitless-sized economy.

So, Wall Street has spent this summer debating whether the capex is too big. Debating whether the multiple is too high. Debating whether Alphabet should blow all of its free cash flow (and then some) to build more datacenters/buy more chips. 

Those are ripples on the surface. As Elon has said, if you knew a tsunami was coming, would you bother cleaning up the beach?

P.S. Pro Perspectives is the daily note — the macro, policy and market structure work that ties everything together. To see how that work gets applied, we manage two model portfolios with documented, multi-year track records: Billionaire’s Portfolio and AI-Innovation Portfolio. Different strategies. Complementary research. Explore the platforms below…