Issue #47

One is the “operating system” for the US government; the other is the essential fuel for NVIDIA’s engines

The "AI Revolution" has officially moved from the boardroom to the balance sheet. For the past two years, the market has been fueled by speculation and excitement. But as we head into 2026, the winners are no longer the companies with the best "ideas"—they are the companies providing the infrastructure and the intelligence that the world literally cannot run without.

When I look for stocks to buy and hold forever, I don’t look for trends; I look for monopolies of necessity. I look for companies that have built a "moat" so wide that competitors aren't just behind—they are irrelevant.

In this edition of the newsletter, I am breaking down my top two high-conviction AI picks. These aren't just "tech stocks." They are the foundational pillars of the new digital economy.

• The First is the "Operating System" of the modern world—a company that has turned data into a weapon for governments and a goldmine for enterprises.
• The Second is the "Fuel" of the AI engine—a semiconductor giant that has pivoted from a cyclical chipmaker to an essential provider of the high-speed memory that makes Generative AI possible.

If you are looking to build a portfolio that thrives on the structural shift toward a machine-led future, these are the two names you need to own.

Why These Two? Why Now?

While the broader market often gets distracted by short-term interest rate pivots or geopolitical noise, Palantir (PLTR) and Micron (MU) have spent 2025 proving that their growth is "uncoupled" from the standard economic cycle. One provides the software that allows humans to make sense of chaos, and the other provides the hardware that allows machines to think at the speed of light.

Let’s dive into the deep analysis of why these two stocks belong in your "forever" bucket.

Palantir Technologies Inc (NASDAQ: PLTR)

Palantir Technologies Inc (NASDAQ: PLTR) is a premier American software company specializing in big data analytics and artificial intelligence. By providing the "operating system" for modern enterprises and government agencies, Palantir enables organizations to integrate disparate data sources and apply advanced AI to real-world decision-making. Its suite of platforms—Gotham, Foundry, and the Artificial Intelligence Platform (AIP)—positions it at the forefront of the global AI revolution.

Business Model and Revenue Streams 📦

Palantir’s business model revolves around long-term, high-value software subscriptions and professional services that deeply embed its technology into a client’s operations. The company follows a "land and expand" strategy, often starting with high-impact pilot programs that evolve into multi-year, multi-million dollar contracts. Revenue is primarily generated through two core segments:

• Government Revenue: This is Palantir’s historical foundation, serving intelligence agencies, defense departments, and law enforcement (primarily via the Gotham platform). These contracts are typically large-scale and stable, driven by mission-critical needs such as counter-terrorism, disaster relief, and military logistics.
• Commercial Revenue: This segment focuses on private sector enterprises (primarily via Foundry and AIP). It is currently the company’s fastest-growing engine, as businesses across healthcare, energy, and finance race to "operationalize" AI. By creating a central "ontology" of a company’s data, Palantir allows executives to run simulations and automate complex workflows.

Macroeconomic policies and geopolitical shifts act as significant tailwinds for Palantir. Heightened global tensions and increased defense spending in the U.S. and among NATO allies drive demand for its "defense-tech" capabilities. Domestically, while inflation or high interest rates can sometimes tighten corporate budgets, the urgent need for AI-driven efficiency has made Palantir’s software a "must-have" rather than a "nice-to-have" for many Fortune 500 companies.

Recent Performance and Corporate Developments 📈

Palantir delivered a "monumental" performance in the third quarter of 2025, shattering consensus expectations and raising its full-year guidance for the third consecutive time this year.

Q3 2025 Financial Highlights: 💰

• Total Revenue: Revenue surged to $1.181 billion, a 63% increase year-over-year, driven by an explosion in AI demand.
• Net Profit: The company reported GAAP net income of $476 million, representing a robust 40% margin. This marks a significant acceleration in the company’s sustained profitability trend.
• U.S. Commercial Growth: This sub-segment was the star of the quarter, growing 121% year-over-year. The "bootcamp" strategy—where Palantir helps customers build live AI use cases in days—is successfully converting leads into massive contracts.
• Rule of 40 Score: Palantir achieved a rare "Rule of 40" score of 114%, a metric that combines growth and profitability, cementing its status as a top-tier software-as-a-service (SaaS) player.

Strategic Initiatives and Mergers: 🤝

In late 2025, Palantir launched "Chain Reaction," a new infrastructure tool designed to help developers scale AI agents across complex enterprise environments. While Palantir rarely engages in traditional M&A, it has expanded its strategic ecosystem. Notably, in October 2025, Accenture acquired Decho, a specialist Palantir consultancy, specifically to scale Palantir’s AIP and Foundry solutions for health and public service clients—a move that indirectly expands Palantir's implementation capacity globally.

Profitability and Fair Value 🎯

Palantir has transitioned from a high-growth "cash burner" to a highly profitable powerhouse. Its path to sustained value is built on:

• High Operating Leverage: Once the software is integrated, the cost of supporting an additional user or use case is minimal, allowing margins to expand rapidly as clients scale.
• AIP Dominance: The Artificial Intelligence Platform (AIP) is seeing "unprecedented" adoption, acting as the primary catalyst for the company’s recent margin expansion.

Regarding fair value, the stock remains a subject of intense debate. Trading at approximately 109 times revenue in late 2025, many traditional valuation models suggest it is overvalued. However, bulls argue that its "parabolic" growth in the U.S. commercial sector and its unique position as the "OS for AI" justify a premium. While its intrinsic value based on discounted cash flow might sit lower (around $73 according to some conservative estimates), its current market price near $180 reflects a "scarcity premium" for a company that is essentially defining a new category of enterprise software.

Analyst Estimates and Ratings 📊

• Consensus Rating: Despite its high valuation, the consensus remains a cautious but optimistic "Hold" to "Buy," with a significant surge in "Buy" ratings in the last 30 days following the Q3 earnings beat.
• Price Targets: Analysts are rapidly playing catch-up. Bank of America recently reiterated a "Buy" rating with a price target of $255, citing "unmatched AI momentum." Other analysts have a more modest average 12-month target of $193, though these targets have been revised upward frequently throughout 2025.

Investor-Focused Takeaway: Is PLTR Right for Your Portfolio?

Palantir is no longer just a "black box" government contractor; it has become a fundamental infrastructure play for the AI age. Its ability to generate massive free cash flow while maintaining triple-digit growth in its commercial segment is nearly unprecedented in the software industry.

What to Watch in the Near Term: 📈

• S&P 500 & Nasdaq Momentum: As a recent addition to major indices, Palantir is now a staple in institutional portfolios, making it more sensitive to broader tech market movements.
• Bootcamp Conversion: Watch the "Total Contract Value" (TCV) in upcoming reports. If Palantir continues to close hundreds of deals over $1 million, the growth story remains intact.
• Valuation Volatility: Because the stock trades at a high multiple, expect sharp price swings if there is any perceived slowdown in AI spending.

Recommendation:

Palantir (PLTR) is a high-conviction "Buy and Hold" for investors who believe AI will be the defining economic driver of the next decade. While the entry price is steep, the company’s "Rule of 40" performance and dominant moat in government and enterprise data make it a unique asset that may never be "cheap" by traditional standards.

Micron Technology Inc (NASDAQ: MU)

Micron Technology Inc (NASDAQ: MU) is a global leader in memory and storage solutions, specializing in DRAM (Dynamic Random-Access Memory) and NAND flash memory. As of late 2025, Micron has undergone a massive strategic shift, transitioning from a cyclical commodity chipmaker to a critical provider of high-performance components for the Artificial Intelligence (AI) era. Its memory chips are now the "fuel" for AI servers, autonomous vehicles, and high-end smartphones.

Business Model and Revenue Streams 📦

Micron’s business model is built on designing and manufacturing advanced semiconductor technologies that are essential for data processing and storage. The company has recently pivoted away from lower-margin consumer markets to focus on high-value enterprise and AI applications. Its revenue is primarily generated from two core product categories:

• DRAM (Dynamic Random-Access Memory): This is Micron’s primary powerhouse, accounting for roughly 77% of total revenue. Within this segment, High Bandwidth Memory (HBM) is the star performer. HBM is essential for AI accelerators (like those from NVIDIA), and Micron has successfully captured significant market share, with its HBM supply for 2025 being sold out well in advance.
• NAND Flash Memory: Representing about 23% of revenue, NAND is used for long-term data storage in Solid State Drives (SSDs) and mobile devices. Micron has recently emphasized high-capacity enterprise SSDs for data centers, which offer much higher margins than traditional consumer drives.

Macroeconomic policies, specifically the "CHIPS Act" and trade regulations, significantly impact Micron. The company is currently making massive multi-year investments in U.S.-based manufacturing facilities (in Idaho and New York) supported by government incentives. While geopolitical trade tensions and potential tariffs remain a risk, the global "arms race" for AI sovereignty has made Micron’s technology a strategic national asset, insulating it from some of the volatility typically seen in consumer electronics.

Recent Performance and Corporate Developments 📈

Micron just concluded a record-breaking fiscal quarter, with its Q1 2026 results (reported December 17, 2025) signaling a "new phase" of growth.

Recent Financial Highlights: 💰

• Record Revenue: For Q1 2026, Micron reported revenue of $13.64 billion, a staggering 57% increase year-over-year, beating Wall Street estimates of $12.84 billion.
• Profitability Explosion: Net income reached $5.24 billion, compared to $1.87 billion in the same period last year. Adjusted Earnings Per Share (EPS) came in at $4.78, far exceeding the projected $3.95.
• Margin Expansion: Non-GAAP gross margins expanded to 56.8%, driven by the premium pricing of HBM products and a tightening global supply of memory chips.
• Cloud Dominance: Revenue from the Cloud Memory Business Unit doubled on an annual basis, reflecting the aggressive build-out of AI data centers by "hyperscalers" like Microsoft and Google.

Strategic Initiatives and Mergers: 🤝

In a major strategic move in December 2025, Micron announced it is exiting the Crucial consumer business. By discontinuing this legacy brand, Micron is redirecting its manufacturing capacity and R&D resources entirely toward high-growth enterprise, AI, and automotive segments. There have been no recent large-scale mergers; instead, the company is focused on "organic" expansion, including the certification of its next-generation HBM4 products and automotive-grade UFS 4.1 chips for AI-enabled vehicles.

Profitability and Fair Value 🎯

Micron has moved firmly past the "cyclical trough" of previous years. Its path to sustained profitability is now tied to a structural shortage of high-end memory.

• Pricing Power: Because AI requires significantly more memory than traditional computing, demand is outstripping supply. This gives Micron immense pricing power, allowing it to maintain gross margins above 50%—a milestone it hadn't reached consistently since 2018.
• Operational Efficiency: By exiting the consumer market, Micron has reduced its exposure to price-sensitive retail shoppers, focusing instead on long-term contracts with enterprise giants.

In terms of fair value, Micron is currently viewed as a "growth at a reasonable price" (GARP) play. Despite the stock surging over 110% in the last year to trade around $256, it still trades at a forward P/E ratio of approximately 14-15x for fiscal 2026. Given its triple-digit earnings growth and record free cash flow ($3.9 billion in the latest quarter), many investors argue that the market has not yet fully priced in the "higher-for-longer" nature of this AI-driven cycle.

Analyst Estimates and Ratings 📊

• Consensus Rating: The consensus remains a "Strong Buy." Following the December earnings beat, over 15 major firms revised their earnings estimates upward.
• Price Targets: Analysts are aggressively raising targets. Wedbush and Needham recently boosted their price targets to $300, while Wolfe Research has set a high-end target of $350. The average 12-month consensus has climbed to roughly $285, suggesting double-digit upside even after the recent rally.

Investor-Focused Takeaway: Is MU Right for Your Portfolio?

Micron is the "picks and shovels" play of the semiconductor world. While NVIDIA makes the "engines" (GPUs) for AI, those engines cannot run without Micron's "fuel" (HBM and high-capacity DRAM).

What to Watch in the Near Term: 📈

• HBM4 Roadmap: Success in the next generation of High Bandwidth Memory will determine if Micron can maintain its lead over rivals like Samsung and SK Hynix.
• Capital Expenditures: Micron plans to spend $18 billion in 2026 on new fabs. Investors should monitor if this supply comes online fast enough to meet demand without creating a future oversupply.
• Enterprise AI Spending: Any slowdown in data center capex from big tech would be the primary risk to the "hold forever" thesis.

Recommendation:

Micron (MU) is a core holding for any AI-focused portfolio. By shedding its "commodity" past and becoming an "AI essential," the company has created a much higher floor for its valuation. For long-term investors, the combination of record margins and a sold-out product pipeline makes it a premier buy-and-hold candidate.

Final Take: Dominating the AI Value Chain from Silicon to Software

While the market often gets distracted by flashy consumer gadgets and unproven AI startups, Palantir (PLTR) and Micron (MU) are positioned where the actual utility of AI is realized—at the levels of high-performance hardware and enterprise-scale intelligence.

🛡️ Palantir Technologies (PLTR) — The Operating System for the Modern Giant

• Historic Efficiency: Recently achieved a rare 114% "Rule of 40" score, proving they can grow at lightning speed while maintaining massive profitability.
• Unrivaled Moat: The "Ontology" at the heart of their platform makes Palantir's software nearly impossible to replace once integrated into a client’s ecosystem.
• AIP Momentum: Their bootcamp strategy is converting U.S. commercial leads into multi-million dollar contracts at a record pace.

➤ Best for: Investors seeking a high-margin software powerhouse that is essentially "uncoupled" from the standard economic cycle due to its mission-critical nature.

💾 Micron Technology (MU) — The High-Octane Fuel for the AI Engine

• Sold Out Success: Micron has already fully committed its entire 2026 supply of High Bandwidth Memory (HBM), giving them incredible revenue visibility.
• Strategic Pivot: By exiting the lower-margin consumer business, they have transformed into a pure-play enterprise and AI infrastructure leader.
• Pricing Power: As the only U.S.-based memory manufacturer, Micron is a strategic national asset with the power to maintain high margins during the current "supercycle."

➤ Best for: Long-term investors who want a "picks and shovels" play with hardware-level exposure to the data center build-out and autonomous vehicle revolution.

Investor Insight

🏗️ Want the hardware foundation and "fuel" for AI? → MU

🧬 Want the software intelligence and decision-making engine? → PLTR

Bottom Line:

The "easy money" in the AI trade is over—the next decade belongs to the companies that provide the essential infrastructure. Palantir and Micron have moved past the hype to deliver record-breaking cash flow and sustained growth. By owning the software that makes sense of the data and the hardware that allows it to process, you aren't just betting on AI; you are owning the very pipes through which the future of the global economy will flow.

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Happy Trading
​— Team Premium Stock Alerts