It turns out that Palantir (PLTR) CEO Alex Karp’s gloomy warning about the AI industry was no fluke.
In the past few years, the word “AI” has become like a broken record, heard at least once every day, usually followed by a wave of anxiety.
What has happened amidst all the FOMO and paranoia is that users have started sharing almost everything that is considered “secret” under the sun in search of answers.
Microsoft (MSFT) CEO Satya Nadella has now raised similar concerns in a recent blog post on Sn Scratchpad.
Businesses pay for intelligence, but for that to be useful, you need to present AI model companies with proprietary data, workflows, and solutions that give them a competitive edge.
It is actually the opposite of what Nobel Prize winning economist Kenneth Arrow describes as the information paradox.
The consumer is essentially giving up their information to use what they have purchased.
Nadella’s concern is that companies end up paying twice, once in cash and again in institutional knowledge over time.
Satya Nadella says companies may be paying twice for AI
Microsoft CEO Satya Nadella said the real cost of AI could be a starting point.
“You’re actually paying for the intelligence twice, once in money, and again for something more important: the proprietary knowledge you have to reveal to make that intelligence useful,” Nadella wrote in a recent blog post.
For AI systems to perform better, there needs to be a high-quality internal environment, which may include employee information, operational procedures, agent activity, and corrections.
Other places to stay at Palantir:
“Models learn from the ‘exhaust,’ the people who code, the tools agents use, and especially the corrections people make when the model is wrong,” Nadella said. “All adjustments are made to the facility’s information.”
Interestingly, TheStreet’s top tech contributor, Vuk Zdinjak, recently included Palantir CEO Alex Karp’s blast against model-of-bounds providers.
“I’m paying for tokens that don’t make a profit,” Karp said in a recent appearance on CNBC’s “Squawk Box,” describing the frustration he’s heard from corporate clients. “These people are stealing the metal and the alpha of my business.”
Additionally, Karp also challenged the industry’s basic pricing model: “If I could make $1 billion for you tomorrow, wouldn’t I say I’m going to make $1 billion for you, and I want 30%? Why are they charging tokens if it’s so important?”
Nadella’s version sounds less controversial, but more coherent, than Karp’s. However, the basic warning remains the same.
Businesses hire models successfully while offering the knowledge that makes them the best they can be.
“In consuming intelligence, you create intelligence, and what you create must be yours,” as Nadella puts it.
Microsoft’s AI business advisor Satya Nadella’s warning echoes concerns raised by Palantir CEO Alex Karp. Stephen Brashear/Getty Images
Nadella’s warning reinforces Palantir’s AI focus
For investors in Palantir ( PLTR ) stock, Nadella’s warning is important and may indirectly confirm the problem that Karp says Palantir is designed to solve.
The CEO of controversial tech company Karp argued that businesses should not expose their proprietary data, workflows, and operational information to large linguistic models outside their organizations.
Palantir’s answer is Ontology, an application layer that connects a company’s models and operations while controlling which models can be accessed and stored.
Karp said Ontology makes AI “safe and usable and intuitive,” preventing models from storing customer data, replicating business, or transferring sensitive intellectual property.
He went further in his interview with broadcaster Mathias Döpfner, saying that businesses need an application layer that “protects your data from abuse by the big language model providers.”
If customers become more wary of the data they provide, Palantir could be in line for a major long-term suffocation, but it could also create valuation risks elsewhere in the AI sector.
Palantir needs to prove that Ontology can turn those critical concerns into long-term contracts, increasing margins, and measurable customer returns.
It’s worth mentioning that the stock is down 27% in the past six months and is up 26% year to date, according to Seaking Alpha data. Still, Palantir stock is changing hands at 88 non-GAAP earnings, which is steep, to say the least, compared to the industry average of about 25 times.
Nadella’s warning raises the stakes for the AI trade
The interesting part is that the broader AI trade is already facing an uncomfortable question that Wall Street has yet to answer: Who will get enough money to justify the extraordinary spending?
In theory, Amazon, Microsoft, Alphabet, and Meta are expected to spend approx $630 billion in data centers and AI chips by 2026 aloneaccording to Reuters, more than 4 times their 2023 guidance.
However, with recent developments, it seems that the chickens will finally come home to roost as the AI trade takes off.
A recent Bank of America survey found that 45% of fund managers view the AI bubble as the biggest tail risk in the market, Reuters reported. However, investors are still very committed to chip stock trading.
In addition, several of Wall Street’s most prominent figures have sounded the alarm.
Ray Dalio says AI is “now in the early stages of a bubble,” while Jeremy Grantham warns that “sooner or later, the bubble will burst.”
“Big Short” investor Michael Burry has long been skeptical of the AI boom, calling semiconductor valuations “a pure form of overvaluation” and warning that the end may be near.
Nadella’s conflict adds to that vulnerability.
The reverse information paradox may lead customers to redirect spending to private, model-agnostic systems, which are weighted by big names in AI and call their valuations nosebleeds.
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This story was originally published by TheStreet on Jul 15, 2026, where it first appeared on Investment part. Add TheStreet as a Preferred Source by clicking here.
