Palantir’s Major Defense Contract Faces Skepticism from Prominent Short Seller

The investment community remains deeply divided on Palantir Technologies. A recent $448 million contract award from the U.S. Navy has reinforced the company's strategic position in the defense sector, yet this significant vote of confidence is being directly challenged by a notable bearish bet from a famed investor.

Michael Burry of "Big Short" fame, through his Scion Asset Management firm, has established a substantial short position against Palantir. The move involves put options on nearly five million shares. Burry's primary critique centers on valuation, drawing parallels to the excesses of the dot-com era. He highlights a forward price-to-earnings ratio exceeding 180, based on 2026 earnings estimates, as a core concern.

Naval Contract Solidifies Government Segment Strength

The source of recent bullish sentiment is a major project with the U.S. Navy, referred to as "ShipOS." Under this agreement, Palantir will deploy its Artificial Intelligence Platform (AIP) and Foundry software to optimize and accelerate submarine production. The initiative aims to slash logistical planning timelines from hours to minutes and streamline supply chains involving more than 100 suppliers.

Market analysts interpret this contract as a powerful demonstration of Palantir's entrenched dominance within the government sector. This segment already reported a 52% year-over-year revenue increase in the last quarter. The deal also provides a clear and predictable revenue stream extending through 2026.

Should investors sell immediately? Or is it worth buying Palantir?

Market Momentum Overrides Valuation Concerns

For now, institutional demand for defense and artificial intelligence equities appears to be overshadowing traditional valuation apprehensions. Investors have largely disregarded the warning signals, continuing to bid the stock higher.

Palantir shares closed at 160.66 euros, cementing a year-to-date advance of over 119%. This performance ranks it among the market's standout equities in 2024.

The critical question for the stock's future trajectory is whether Palantir can sustain its high growth velocity in its commercial business segment. Upcoming quarterly results will be scrutinized to determine if fundamental execution can justify its premium valuation or if Michael Burry's skepticism will prove prescient.