Palantir's AI Surge Meets Valuation Skepticism

What happened

Palantir's revenue growth accelerated to 93% year-over-year in Q2 2026 on surging demand for its AI platform, but the stock trades at a P/E of 147 and EV/EBITDA of 253, leaving no margin of safety. The Motley Fool article spotlights Michael Burry's bear case, which likely argues that such rapid growth is unsustainable and the valuation is detached from fundamentals, even as bulls point to Palantir's potential to become one of the world's most valuable companies. Our DeepValue analysis aligns with the skeptical view: while the business is operationally excellent with 85% gross margins, $9.2 billion in cash, and no debt, the market is pricing in flawless conversion of bookings into revenue that is not yet proven—company-wide RPO stands at only $4.9 billion and many contracts are terminable for convenience. Risks are compounded by heavy U.S. concentration (80% of revenue), reliance on a few large customers, and significant stock-based compensation ($466.8 million in 1H26) that dilutes per-share value. Consequently, we maintain a WAIT rating, with an attractive entry near $155 and a trim level above $205, pending evidence that remaining performance obligations expand and government awards convert cleanly.

Implication

The valuation leaves no room for error, so if revenue growth slows or backlog conversion disappoints, the stock could de-rate sharply from its current multiple. Watch company-wide RPO, deferred revenue, and customer deposits over the next two quarterly reports: if they fail to grow in line with commercial deal activity, the growth narrative weakens. The Pentagon's proposed up-to-$244 million action is a critical test of government demand, and any delay or competition challenge would undermine the defense segment's momentum. Non-U.S. revenue must exceed 20% of total revenue to validate the sovereign AI thesis as a global, rather than U.S.-centric, story. Until these checkpoints clear, maintaining a WAIT stance with defined entry ($155) and trim ($205) levels provides a disciplined framework for navigating this high-momentum but richly valued stock.

Thesis delta

The Motley Fool article does not change our investment thesis; it reinforces the bear case we already incorporate. Our WAIT rating and conviction of 4.0 remain unchanged, as the article adds no new data on backlog conversion, international expansion, or earnings quality. The key unresolved issue is still whether headline deal values convert into auditable backlog, funded awards, and per-share earnings fast enough to support the valuation.