Palantir: A Speculative Fancy

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The recent discomfiture in the software sector has been, shall we say, thorough. Few ventures have escaped unscathed, not even Palantir Technologies, a name once whispered with the fervour usually reserved for dubious religious sects. The stock, briefly fashionable, now finds itself…moderated.

With a decline of approximately twenty per cent this year, the question arises: is Palantir a prudent investment, a regrettable indulgence, or merely something to be observed with detached amusement?

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The Allure of the Algorithm

Palantir has, with a degree of cunning, insinuated itself into the burgeoning landscape of artificial intelligence. Its platform, it is claimed, renders large language models marginally more useful – a feat akin to teaching a parrot to compose sonnets. It functions as an orchestration layer, gathering data from disparate sources and arranging it into a rather elaborate ontology. This, apparently, mitigates the tendency of these digital oracles to utter complete nonsense, and allows them to address problems of some consequence, provided the data is sufficiently…structured.

The solution has found favour with commercial clients in the United States, a nation ever eager to embrace technological novelties. New customers are being acquired with commendable haste, and existing ones are expanding their reliance upon Palantir’s services. This has resulted in ten consecutive quarters of accelerating revenue growth – a statistic that should be regarded with a healthy dose of scepticism. Last quarter, revenue surged by seventy per cent, while U.S. commercial revenue experienced a rather extravagant increase of one hundred and thirty-seven per cent. One wonders if this momentum is sustainable, or merely the result of a particularly exuberant accounting period.

Given the breadth of potential applications, the company possesses a degree of growth potential. Whether that potential will be realised, however, remains to be seen.

The Price of Ambition

Even after this recent correction, Palantir’s stock retains a valuation that can only be described as optimistic. It currently trades at a forward price-to-sales ratio of forty-five times 2026 estimates and a forward price-to-earnings multiple exceeding one hundred times. Such figures suggest that the market has already priced in a considerable degree of future success – a dangerous assumption, as any seasoned investor will attest.

Furthermore, the company remains heavily reliant upon the U.S. government, which accounts for more than a third of its revenue. While benefiting from current modernization efforts within the military and intelligence agencies, this dependence introduces a degree of vulnerability. Government contracts are notoriously fickle, and subject to the whims of political priorities. Different administrations, naturally, have different agendas.

There is also the possibility, however remote, that Palantir itself may become a victim of technological disruption. It is not, after all, an ‘AI-native’ company. A competitor, built from the ground up with a more elegant and efficient architecture, could emerge to challenge its dominance. Should growth falter, the valuation multiple could collapse with alarming speed.

A Measured Assessment

At this juncture, I suspect Palantir possesses the potential to become a significant enterprise – eventually. However, even the most successful companies – Nvidia, Alphabet, Apple, Microsoft, and Amazon – have endured substantial setbacks along the way. The path to greatness is rarely smooth.

Were I a current shareholder, I would maintain my position for the long term. However, given the current valuation, I would hesitate to pursue further investment at this price. A more attractive entry point, perhaps below $110, would offer a more reasonable valuation of around 25 times 2027 revenue estimates. One should always remember the virtues of patience, and the folly of chasing ephemeral enthusiasms.

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2026-02-22 03:02