There are not many stocks that have been as much doubted as Tesla and at the same time, given such returns as Tesla. Citing the company as being overvalued that is disconnected from its fundamentals, have been the critics’ comments for years.
However, Tesla has always defied such terms, and keeps high prices, along with rewarding those who believed in it for the long run.
Part of that strength is making the retail investors invest in a vision rather than in numbers, and who are wholeheartedly swayed by the narrative of the charismatic CEO who has been through every sell-off with the investors.
The comparison between such a scenario and Palantir is increasingly being made. Just like Tesla, Palantir has been persistently criticized about its valuation and high stock prices compared to its earnings, but still the shares keep on finding buyers.
It is a growing trend that in the retail participation era, stocks that do not comply with the traditional valuation standards are not considered abnormal anymore, and perhaps Palantir is the latest one in the list.
Palantir’s AI Momentum Is Hard to Ignore
The main application of Palantir’s technology is in AI-enabled data analytics software, which was developed for governmental bodies and then spread widely to commercial areas. The company’s Artificial Intelligence Platform (AIP) is its main engine of growth, which enables its customers to directly integrate AI-powered agents into their operations.
Such systems can either take on the entire process or a part of it, requiring supervision of human employees, which was once a labor-intensive activity and is now being done through technology.
The outcomes have been incredible. In the last quarter, Palantir announced that total sales went up 63%, the commercial segment’s revenue increased by 73% compared to the previous year, and the government’s revenue rose by 55%.
The revenue reached $1.18 billion and the profit margins were 40%, which indicates that Palantir is growing big and at the same time maintaining good profit-making. Considering the product and the execution the company looks like a really great player in AI.
The Valuation Problem
The fieriest point of the discussion is its valuation. Palantir is approximately trading at 123 times sales and at 259 times forward earnings, which puts it on the list of the most expensive stocks in the market. Its premium stands out even when it is compared with the elite AI peers.
For instance, Nvidia is not only growing at the same rate, but is also posting higher margins and is being valued at a much lower multiple in the stock market than Palantir.
The only way for Palantir to live up to its current valuation through conventional parameters is that its financials would need to grow enormously, along with maintaining the stock price at the same level. This is the only way for this company to justify its current price.
That difference gives rise to ongoing worries such as the stock is priced for perfection, just like Tesla has been for years, though it has repeatedly failed to collapse to reasonable levels.
Palantir Could Follow Tesla’s Path
One of the reasons is the ownership structure. The institutional ownership of Tesla is significantly lower than the values of such big corporations as Meta or Berkshire Hathaway, which means that the retail investors take the big share in influencing the stock prices.
So, Palantir’s case is very similar. Approximately 56.5% of Palantir belongs to institutional investors, which is a smaller percentage than comparable companies like AMD or Mastercard, where the institutional ownership is quite high.
This matters because the stocks are driven by private investors who usually trade upon story, momentum, and belief, rather than discounted cash flow models. In such a scenario, the traditional valuation approach becomes irrelevant, and going against the trend could turn out to be an expensive mistake.
Tesla has made the market witness this over and over again, and Palantir could be walking a similar road. Those who think that Palantir is a bubble may be correct theoretically, but the experience with Tesla shows that it can be quite an expensive mistake to go against a retail-driven narrative stock.
Whether Palantir turns out to be the next Tesla is still just a matter of speculation, but it is evidently playing by the same rules.
