Alex Karp, co-founder and CEO of Palantir, believes that this period of “fatal” macroeconomic uncertainty will crush many companies with fragile foundations.
“Tough times are incredibly good for Palantir…Tough times really reveal corporate perennials, technology is going through tough times…interest rates are the cause,” Karp said Thursday on CNBC’s “Squawk Box.” “Will this deadly tidal wave wipe out some companies? Yes, it will.”
The Federal Reserve on Wednesday raised benchmark interest rates by another three-quarters of a percentage point to the 3%-3.25% range, the highest level since early 2008. The Bank of England, the Swiss National Bank, and central banks in Norway followed suit in the Philippines, South Africa, Taiwan, Vietnam and Indonesia. Likewise, it raised inflation rates to control inflation that had escalated over the past year.
Palantir is a data analytics software developer that went public with a direct listing in September 2020 after nearly two decades as a private company. The stock is down 60% this year.
Only high-quality companies that produce durable goods will survive tough times, Karp said.
“You’ll see that the perennials that get out of this in three or four years … will be very much from America, very much from the West Coast and they will focus on producing things that really matter,” Karp said.
The risk of a recession in the US crept higher as the Federal Reserve pledged to beat inflation by raising interest rates dramatically. The central bank lowered its economic forecast, forecasting higher unemployment and much slower GDP growth.
Karp thinks the situation is worse abroad.
“People are less afraid about energy outside of America,” Karp said. “They are so afraid about the macro political conditions that no one wants to talk about them. And their institutions are built for a stable and united world of peace. It is clear that balance sheets are often unprepared for what is going to happen, which I think will be very bad in the next couple of years politically and economically “.