Michael Burry, the renowned investor who predicted the 2008 housing crisis in The big shorthas once again adopted a contrary stance. In his recent Substack post, “Palantir’s New Clothes,” the founder of the now-defunct Scion Asset Management argues that Palantir Technologies (PLTR) is wildly overvalued, comparing its AI platform to a naked emperor.
He cites rising accounts receivable, huge dilution, unreliable third-party AI models, and a business model that looks more like low-margin consulting than scalable software. Burry pegs the fair value of the shares at just $46, implying a drop of approximately 65% from current levels of around $131. While some of your concerns about valuation risks and execution in a crowded AI space are valid, you are also very wrong.
bar chart.com
Palantir Technologies, headquartered in Denver, Colorado, creates powerful data integration and analytics platforms that help organizations—primarily governments, militaries, and large enterprises—make sense of vast, complex data sets in real time. Its core offerings include Gotham for defense and intelligence, Foundry for commercial operations, and the new Artificial Intelligence Platform (AIP), which combines secure AI orchestration over enterprise data. These tools power everything from counterterrorism to factory optimization, combining human knowledge with machine-scale analysis.
In 2026, PLTR stock has fallen 26% year-to-date (YTD), a sharp pullback from its 135% rise in 2025. In contrast, the S&P 500 ($SPX) has been essentially flat, with a negligible 0.14% decline over the same period. With a market cap of $313 billion, the stock trades at a P/E of 219x, well above the software industry’s typical 30-50x, reflecting its history of lack of profitability until recent quarters. The forward P/E stands at 123x, still premium but more digestible given the expected earnings growth. The sales price is high at 69 times, compared to historical averages for high-growth SaaS companies in the range of 10 to 20 times during expansion phases.
These metrics argue in favor of Burry’s thesis that Palantir is “expensive” by traditional measures, but they underscore the AI stock’s transition: Once a cash-burning startup, it’s now generating software-like margins as revenue grows. In reality, the stock isn’t undervalued at all, but calling it overvalued ignores the ongoing earnings inflection: It’s trading at a price that values continued hypergrowth rather than the past.
Burry’s critique, while exhaustive, seems stuck in Palantir’s rearview mirror. His deep dive into historical accounting quirks, like accounts receivable exploding faster than revenue in the “construction” years or persistent shareholder dilution, highlights real problems from 2020 to 2023, when the company was pouring money into R&D and custom integrations. But that era has passed. Palantir has flipped the script with explosive business momentum, particularly in the US, where revenue increased 137% year-over-year (YoY) in the fourth quarter, driving overall growth of 70% to $1.41 billion.
The real game changer is AIP, which has driven adoption. Instead of long, custom implementations that dragged on for months, Palantir now hosts intensive five-day “boot camps” that get customers up and running on the platform almost immediately. This has reduced sales cycles, increased transaction sizes and driven a 34% increase in customer numbers to 954 in 2025.
Revenue is accruing at rates of 50-60%, and the forecast for 2026 is $7.19 billion (an increase of 61%). Even more telling is operating leverage: Incremental dollars are falling to the bottom line with margins of 55%, as fixed rig costs are spread across a rapidly expanding base. Adjusted operating income is projected to triple in the coming years, reaching billions, as U.S. commercial revenue alone will surpass $3 billion in 2026.
Burry dismisses this as hype around “untrustworthy” LLMs, but AIP isn’t just another chatbot: it’s the secure orchestration layer that prepares AI production for regulated enterprises. It integrates disparate data sources, strengthens governance, and delivers reliable results where raw models fail. This moat is widening, turning Palantir from a heavy-duty company into a true software powerhouse.
The red flags of the past are relics of a company that was still testing its model. Current metrics show that a company is reaching its escape velocity and its profits are growing faster than almost any other company. Burry’s target of $46 undervalues this transformation by orders of magnitude.
Wall Street remains broadly bullish on Palantir despite the recent pullback. According bar diagram According to data, 25 analysts cover the stock and rate it as a “Moderate Buy” with an average score of 3.76 (on a scale of 1 to 5, with 5 being “Strong Buy”). The breakdown shows a shift toward positivity: 12 “Strong Buy” ratings, 10 “Holds,” one “Moderate Sell” and two “Strong Sells.” This marks a notable improvement from three months ago, when the consensus was a weaker “Hold” with only four “Strong Buys”; The improved sentiment reflects Palantir’s strong fourth-quarter results and 2026 guidance that beat expectations.
The average price target stands at $200.43, implying a potential upside of 53%, with highs reaching $260 and lows reaching $90. Analysts view the business acceleration and efficiencies driven by AIP as sustainable, and project continued 50%+ revenue growth and margin expansion through 2028. While not unanimous (some worry about competition from big tech companies), the consensus leans bullish and sees Palantir as a leader in enterprise AI rather than a stock bubble.
www.barchart.com
As of the date of publication, Rich Duprey had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
