saw its stock tumble sharply after renowned investor Michael Burry, the contrarian hedge fund manager made famous by his prescient bet against the housing market in 2008, published a sweeping 10,000-word newsletter casting doubt on the sustainability of the current artificial intelligence investment cycle.
The stock fell as much as 6.7% on Thursday, February 12, closing down 4.83% at $129.13, and continued sliding in premarket trading on Friday, February 13, dropping an additional 1.54% to $127.18 as of 7:20 AM EST.
The sell-off reflects growing investor anxiety over stretched valuations in the AI sector, even as Palantir’s underlying business continues to post impressive growth metrics that its defenders argue justify the premium pricing.
Burry Questions the Sustainability of AI Spending
In his lengthy newsletter, Burry took direct aim at Palantir, suggesting the stock could fall as much as 66% from its then-current price, to approximately $46 per share. While he outlined several possible scenarios with price outcomes ranging from $21 to $146 per share, his overall stance was unambiguously bearish, stating his belief that the company’s recent winning streak would not endure.
His concerns appear to center on broader structural issues within the AI investment cycle, including questions around data center depreciation and the lofty valuations assigned to AI-adjacent companies like Palantir. Given Burry’s legendary status on Wall Street, cemented by his $725 million windfall for investors during the 2008 housing collapse, even a hint of skepticism from him carries significant market weight.
Not all analysts share Burry’s pessimism, however. DA Davidson, which holds a Neutral rating on Palantir with a price target of $180 (recently lowered from $215), pushed back firmly on the thesis after reading it in full. The firm argued that Burry’s newsletter contained no new evidence or arguments that would materially change their assessment of the company, while acknowledging that shares remain expensive at current levels.
Their analysts pointedly questioned how Palantir could be growing faster than virtually any other software company at scale, with accelerating momentum and strong free cash flow margins, if it were not genuinely delivering value to its clients. DA Davidson characterized Palantir as a rare enterprise software company that is actually helping clients extract real-world value from AI in mission-critical systems, rather than merely riding the hype wave.
PLTR Stock Update: Valuation and Market Reaction
From a pure numbers standpoint, Palantir’s stock presents a paradox that sits at the heart of the Burry debate. The company closed Thursday at $129.13, representing a year-to-date decline of approximately 27.35%, a stark contrast to its extraordinary three-year return of over 1,619% and five-year return of roughly 305%, both dwarfing the S&P 500’s comparable figures of 67% and 74% respectively.
The stock’s 52-week range stretches from $66.12 to $207.52, underscoring the extreme volatility that has become synonymous with PLTR, and its beta of 1.69 confirms it moves significantly more than the broader market. Trading volume on Thursday reached approximately 73.4 million shares, well above its average daily volume of around 45.2 million, signaling that the Burry news drove unusually heavy activity.
Valuation remains the central battleground. Palantir trades at a trailing price-to-earnings ratio of roughly 205 and a forward P/E of approximately 109, with a price-to-sales ratio of 74 – multiples that are extraordinary even by high-growth tech standards.
Yet the underlying business fundamentals are difficult to dismiss: the company posted Q4 FY25 revenue of $1.41 billion with earnings of $647.97 million, beat earnings-per-share estimates for four consecutive quarters, and carries a healthy $7.18 billion in cash with a low debt-to-equity ratio of just 3.06%.
The consensus analyst price target sits at $189.92, nearly 47% above the current price, with targets ranging from a bearish $70 to a bullish $260, and the next earnings date is set for May 4, 2026. Whether Burry’s macro-level concerns about the AI spending cycle ultimately prove correct or whether Palantir’s growth engine continues to defy skeptics remains the defining question for shareholders heading into the next quarter.
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