To The Moon

1. Fundamentals vs Market Reaction

AppLovin

• AppLovin reported excellent Q4 results: revenue ~US$1.66 billion (+66 % year-on-year) and net income +84 % to ~US$1.10 billion, with adjusted EBITDA up ~82 %. These outcomes beat expectations and point to strong earnings quality and profit margin expansion. 

• Management also guided for continued sequential revenue growth in Q1. 

• Despite this, the shares fell sharply on earnings day. The decline reflects investor concern rather than lack of operational performance.

Palantir

• Recent price weakness in PLTR is part of a broader pullback in software and technology stocks. Reuters and market sources have noted Palantir among software names with significant drawdowns as sentiment deteriorated. 

Implication: The divergence between strong fundamental metrics and weak share price suggests market forces beyond quarterly numbers are at work.

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2. Macro and Sector-Level Drivers

Software Sell-Off Trigger

• The recent sell-off in software stocks has been linked to rising concerns over AI’s disruptive impact on traditional software business models. A notable example cited in market commentary is the release of new AI tools from Anthropic that raised existential questions about certain software categories. 

Valuation Reset Narrative

• Executives from major investment firms, including Apollo, have described the current period as an early stage of a “very violent technology cycle”. They argue that valuations are being recalibrated to reflect greater uncertainty about future growth and disruption risk. 

• This narrative holds that the market is aggressively sorting winners and losers based on perceived AI resilience and long-term value.

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3. Are APP and PLTR “Mispriced”?

Possible Reasons for Panic Selling

The share price weakness could be explained by one or more of the following catalysing factors:

1. Risk Aversion and Rotation:

Investors are rotating out of high-beta software and tech stocks into more defensive or value-oriented sectors amid fear that AI will erode traditional subscription and licensing revenue streams. 

2. Sentiment Over Fundamentals:

Short-term market dynamics often price forward-looking risk much more sharply than fundamentals justify. Strong earnings are less influential if growth forecasts or macro expectations weaken.

3. AI-Driven Valuation Uncertainty:

Future earnings visibility is shifting due to rapid AI innovation. Investors may be pricing in greater risk that current business models could be disrupted or commoditised. 

Longer-Term Perspective

• If investors’ fears about AI replacing traditional software are overstated or premature, then well-positioned companies with strong execution (such as AppLovin and Palantir) could indeed be undervalued relative to true long-term potential. Historical precedents show that market panic can overshoot fundamentals.

• Conversely, if AI does materially reduce the profitability of legacy software business models, then valuations today may reflect a necessary repricing rather than mispricing.

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4. Conclusion

AppLovin (APP) and Palantir (PLTR) have solid operational performance and strong revenue growth indicators, which provides a fundamental basis for value. However, the recent share price weakness reflects broad sector stress and investor caution about AI disruption risks.

It is reasonable to consider that part of the sell-off may be panic-driven rather than purely fundamentals-based. Investors are repricing software businesses under a new AI-influenced regime, which creates volatility and dispersion in valuations.

In this context:

Short term: Price movements may not reflect intrinsic performance due to sentiment and sector rotation.

Medium to long term: Valuation will depend on how effectively these companies adapt and leverage AI to grow revenues and sustain margins.

Thus, one can argue that some of the recent declines may represent mispricing due to systemic fear, but disciplined analysis is required to separate transient sentiment from structural value changes.