Palantir stays a strong buy with solid Q1 growth and low capex amid software sector challenges

Palantir Technologies remains a high-conviction buy despite recent underperformance and a broad software sector downturn. Its Q1 earnings showed accelerating growth and structurally higher profitability compared to AI hardware companies. Unlike chip stocks facing uncertain data center spending, Palantir benefits from durable, recurring demand for early-stage AI applications. The company also spends less than 1% of revenue on capital expenditures, enabling significant free cash flow growth, contrasting with AI hyperscalers like Meta and Microsoft that spend over 50% on capex.