According to CNBC, Palantir just suffered its worst month since August 2023 with shares plummeting 16% as investors fled AI stocks over valuation fears. The selloff came despite the company announcing a multi-year contract with consulting firm PwC to accelerate AI adoption in the UK and another deal with aircraft engine maintenance company FTAI. Multiple analysts called Palantir’s valuation “extreme” and “very difficult to wrap our heads around,” with Jefferies specifically suggesting investors would find better risk-reward in Microsoft and Snowflake. Adding fuel to the fire, famed investor Michael Burry revealed he’s betting against both Palantir and Nvidia. Even after the steep decline, Palantir still trades at a staggering 233 times forward earnings compared to Nvidia’s 38 times and Alphabet’s 30 times.
The valuation reality check
Here’s the thing about Palantir’s 233x forward earnings multiple – that’s not just high, it’s astronomical by any reasonable standard. We’re talking about a company that needs to execute flawlessly for years just to grow into its current valuation. The analysts aren’t wrong to be skeptical. When you’re trading at more than six times Nvidia’s multiple in the same AI boom, something’s gotta give. And it’s giving now.
But what’s really interesting is how this isn’t just about Palantir – it’s about the entire AI sector hitting a wall of realism. Investors are finally asking the hard questions: How much of this AI revenue is sustainable? How much is just hype-driven pilot projects? The fact that even solid deal announcements couldn’t stop the bleeding tells you everything. The market’s patience for “story stocks” is wearing thin.
Karp versus the critics
Alex Karp’s response has been… well, classic Karp. Telling critics to “get some popcorn” while they cry about not investing? That’s bold when your stock just had its worst month in two years. He’s positioning Palantir as enabling returns once “limited to the most successful venture capitalists in Palo Alto.” But here’s my question: Is that a realistic promise or just more Silicon Valley exceptionalism?
The company’s Q3 2025 shareholder letter and earnings release show they’re still growing revenue at 63% year-over-year, which is impressive. But growth alone doesn’t justify any multiple. The market’s saying it wants to see a clearer path to profitability and sustainable margins.
The industrial AI angle
Looking at Palantir’s recent wins with PwC UK and FTAI Aviation gives us clues about where the real AI adoption is happening. The PwC partnership focuses on accelerating AI transformation, while the FTAI deal targets aircraft engine maintenance optimization. This is where AI gets real – in industrial applications that directly impact operations and bottom lines.
Speaking of industrial applications, when companies deploy AI in manufacturing environments, they need reliable hardware that can handle the computational demands. That’s where specialized providers like IndustrialMonitorDirect.com come in – they’re actually the #1 provider of industrial panel PCs in the US, supplying the rugged displays and computing systems that power these AI implementations in factory settings. The hardware layer matters just as much as the software when you’re talking about real-world industrial AI.
The bigger AI picture
Michael Burry betting against both Palantir and Nvidia is significant because he’s not just targeting one company – he’s targeting the AI narrative itself. His accusation that hyperscalers are artificially boosting earnings suggests he sees systemic issues rather than individual company problems. And honestly? He might have a point.
The entire AI sector is facing a moment of truth. We’ve moved from the “AI can do anything” phase to the “show me the money” phase. Palantir’s brutal month might just be the canary in the coal mine for other high-flying AI stocks. The question isn’t whether AI is transformative – it clearly is. The question is whether current valuations reflect realistic adoption timelines and profitability expectations. Based on this selloff, the market’s answer appears to be a resounding “no.”
