Palantir is suffering from success

You’d think hitting Q4 earnings numbers out of the park thanks to strong demand for your products would be met with cheers from Wall Street (or at least as close to excitement as bankers living off Sweetgreen can muster).

But after defense tech firm Palantir beat top-and bottom line forecasts for its fourth quarter and lifted its full-year revenue guidance, shares dropped 7.95% today.

The reason is simply the company’s mind-boggling valuation. Shares have risen 152% during 2025, pushing its forward price-to-earnings ratio to stratospheric heights, and investors are beginning to worry that Palantir has overextended itself.

“We are fundamental fans and the numbers speak for themselves, but we believe the risk/reward at 83x CY26E rev [which means the company is trading at 86 times its estimated 2026 revenue] is unfavorable and prefer to own AI in other ways,” wrote Jefferies analyst Brent Thill. His new price target of $70 implies a downside of 63% from where shares stand today.

The boys are fighting

There was another factor contributing to today’s selloff. Michael Burry, the iconic The Big Short investor who called the 2008 housing bubble and the founder of hedge fund Scion Asset Management, revealed in 13-F filings that he holds put options on Nvidia and Palantir worth $187 million and $912 million, respectively.

In other words, he’s bet 79.5% of his $1.38 billion portfolio against two of the biggest, best-performing stocks on the market.

“Sometimes, we see bubbles,” Burry wrote ominously on X last week. “Sometimes, there is nothing to do about it. Sometimes the winning move is not to play.”

Palantir CEO Alex Karp didn’t exactly take the news well, calling Burry’s position “market manipulation” on CNBC this morning. He argued that, “The idea that chips and ontology is what you want to short is batsh*t crazy.”

But Burry is by no means the only one worrying about valuations. Nvidia fell 3.96% today, as did several other big AI names, and even Palantir bulls aren’t sure if it can keep up its current momentum.

Karp, for one, seems confident. “I do think this behavior is egregious and I’m going to be dancing around when it’s proven wrong,” said Karp of Burry. Only time will tell whether he is left doing the cha-cha, or holding the bag.—LB