The Cult Stock That Refuses To Cool Off

Author

Noah Zelvis
January 04, 2026

This stock was supposed to slow down once valuation mattered again.

Instead, it finished the year stronger than almost anyone expected.

Now the question is not whether the story is compelling, but how much perfection is already baked into the price.

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What Just Happened

Palantir Technologies Inc (NASDAQ: PLTR) closed out 2025 up more than 130%, capping one of the strongest multi-year runs in the market. The rally has been powered less by Wall Street enthusiasm and more by relentless retail buying, with billions of dollars flowing into the stock even as analysts warn about valuation.

By year-end, Palantir had become one of the most bought individual stocks among retail investors, sitting alongside names like Nvidia and Tesla in net inflows. Institutional money has been far more cautious, but that gap has not slowed momentum. If anything, it has become part of the story.

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The Business

Palantir builds software that helps organizations make sense of complex data and turn it into decisions. Governments use it for defense, intelligence, and logistics. Commercial customers use it to optimize operations, supply chains, and forecasting.

The recent acceleration has come from AIP, Palantir’s Artificial Intelligence Platform. Instead of offering generic AI tools, AIP is designed to run models directly on a customer’s own data, inside controlled environments. That matters for regulated industries and government agencies that cannot simply ship sensitive information into public AI systems.

This positioning has made Palantir a beneficiary of two overlapping trends:

  • Governments spending more on defense, security, and operational efficiency

  • Enterprises wanting AI outcomes without losing control of their data

That combination has turned what used to look like a niche, hard-to-understand business into a clear AI infrastructure play.

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Why Wall Street Still Hesitates

The hesitation is not about whether Palantir has a real business. It is about price.

At over 400 times trailing earnings, the stock trades at a level that leaves almost no room for disappointment. Even strong execution may not be enough to justify further upside unless growth remains exceptional.

For many institutional investors, that makes the stock untouchable. They can admire the product, respect the customer base, and still walk away because the valuation math does not work within risk constraints.

This split between retail enthusiasm and institutional caution is unusual at Palantir’s size, and it is one of the most important dynamics to understand going forward.

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The Bull Case

AIP becomes deeply embedded

If AIP deployments keep expanding inside large customers, switching costs rise quickly. Once software becomes part of daily decision-making, it is very hard to remove.

Government contracts stay durable

Defense and intelligence spending tends to be sticky. If Palantir continues winning long-term government work, it creates a stable revenue base that can fund commercial expansion.

Operating leverage surprises to the upside

Palantir’s margins have improved meaningfully. If revenue growth stays strong while costs scale more slowly, earnings can grow faster than expected, helping the valuation look less extreme over time.

The Bear Case

Valuation leaves no safety net

At this price, even a modest slowdown can trigger sharp drawdowns. The stock has already shown it can drop double digits quickly when sentiment shifts.

AI enthusiasm cools

If the broader AI trade falls out of favor, Palantir is unlikely to be spared. It has become a high-beta proxy for AI optimism, which cuts both ways.

Commercial growth has to keep accelerating

Government revenue alone will not support the current valuation. The market is betting on sustained success with large commercial customers. Any sign that adoption is stalling would matter.

The Setup In The Stock

At roughly $178, Palantir is no longer trading on potential alone. It is priced like a dominant, long-term winner.

That does not mean it cannot go higher. It does mean future gains depend heavily on execution rather than narrative expansion. The stock has moved from being misunderstood to being very well known, and expectations have followed.

Volatility should be expected. This is a stock that routinely swings 10% or more even without company-specific news.

What To Watch Next

  1. Commercial AIP adoption
    New customer wins and expansion inside existing accounts matter more than ever.

  2. Government contract cadence
    Large, multi-year deals help stabilize revenue and support long-term forecasts.

  3. Margins and cash flow
    Profitability needs to keep improving to justify the multiple.

  4. Retail flow behavior
    If retail demand fades meaningfully, the stock could reprice quickly.

How I’d Think About Position Size

This is not a conservative compounder at current levels. It is a high-conviction momentum and execution story.

  • Starter (1–2%) if you want exposure but respect the valuation risk

  • Add cautiously only on significant pullbacks paired with strong fundamentals

  • Reduce if growth slows while the valuation remains stretched

This is a name where discipline matters more than enthusiasm.

The Bottom Line

Palantir has become one of the defining stocks of the AI era, driven by real products, improving fundamentals, and an unusually committed retail base. The business is no longer a mystery, and the execution has been strong.

The trade-off is price. At this valuation, the stock does not need to stumble to struggle. It just needs to be good instead of great.

For investors, that means separating belief in the company from discipline around entry points. Palantir may continue to defy skeptics, but from here, the margin for error is thin.

Action Recap

✅ Starter: small exposure with eyes wide open
✅ Add On Proof: continued AIP traction and margin expansion
⚠️ Trim On Trouble: slowing growth or fading retail support

That's our coverage for today; thanks for reading! Reply to this email with feedback or any tech stocks you want me to check out.

Best Regards,
—Noah Zelvis
Tech Stock Insider