Palantir Shares Defy Gravity Amidst Valuation Concerns

Palantir US69608A1088

The stock of data analytics firm Palantir continues its remarkable ascent as 2025 draws to a close, propelled by a potent mix of retail enthusiasm and significant government contracts. However, this surge, which has seen the share price more than double since the start of the year, is occurring against a backdrop of escalating warnings from analysts who see its valuation metrics entering uncharted territory.

A striking divergence is emerging on Wall Street. While many analysts voice deep skepticism, institutional ownership has climbed to nearly 57%. In a notable move, JPMorgan increased its stake by more than 115% during the third quarter. This highlights a clear disconnect between cautious research notes and the actual investment behavior of major financial players.

Concurrently, corporate insiders have been capitalizing on the elevated share price. Over the past six months, CEO Alexander Karp has sold shares worth approximately $128.8 million. Other executives have also reduced their holdings, a dynamic that often draws investor scrutiny during such powerful rallies.

Retail Investors Fuel the Rally

The primary engine behind the stock's performance has been the retail investment community. According to data from VandaTrack, individual investors have poured a net total of almost $8 billion into Palantir in 2025. This figure represents an increase of over 80% from the previous year and is roughly four times the level seen in 2023.

Consequently, Palantir stock ranks as the fifth most-purchased security by retail traders this year, trailing only mega-cap giants like Tesla and Nvidia. The company’s focus on artificial intelligence software continues to attract substantial capital, despite repeated warnings from market experts.

A Major Naval Contract Validates the Platform

Providing fundamental support for the bullish case is a substantial new contract with the U.S. Navy, valued at $448 million. As part of the "ShipOS" initiative, Palantir's AI platform will be deployed to accelerate supply chains in naval shipbuilding.

Tangible results from the pilot phase underscore the potential. At General Dynamics Electric Boat, the time required for planning submarine schedules was slashed from 160 manual hours to under 10 minutes. Efficiency leaps of this magnitude offer proponents concrete arguments that extend beyond mere market hype.

Soaring Valuation Metrics Spark Debate

Despite these operational successes and a 63% year-over-year revenue growth rate reported for the third quarter, Wall Street's apprehension remains palpable. The central point of contention is the company's astronomical valuation. Palantir currently trades at 435 times its past earnings. For context, the average price-to-earnings ratio for the S&P 500 index sits around 28.

Even when looking forward, the projected forward P/E ratio stands at nearly 189, based on data from Yahoo Finance. Gil Luria, a technology analyst at D.A. Davidson, has cited these metrics in describing the stock as a "no-go" for many institutional clients.

The current situation is defined by this combination of extreme growth—evidenced by a Rule of 40 score of 114%—and a historically rich valuation. The key question for the future trajectory of the share price is whether Palantir can justify these high expectations through continued major contract wins, like the Navy deal, before concerns over a potential valuation bubble grow too heavy for the market to bear.