How Concerned Should Investors Be About Palantir Stock?

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Palantir Technologies Inc. (NASDAQ: PLTR) has been one of the best-performing stocks over the last few years. That’s high praise, particularly in the technology sector, where many winners have emerged. However, it’s difficult to overlook the stock’s obvious valuation concerns.

Palantir is priced for perfection—but that’s not the only concern. For investors in the stock or considering starting a position, it’s important to understand the risks that accompany a stake in PLTR. More importantly, it’s critical to decide whether those risks merit limiting exposure to the stock.

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Does Palantir Offer Long-Term Value Beyond Its Stock Price?

Palantir is a strong company. But a company is different than its stock, and Palantir is not a cheap stock. If you follow Warren Buffett's thinking that price is what you pay, but value is what you get, many investors may find it difficult to initiate a position in PLTR stock.

The honeymoon stage that has led to over 10x growth for early investors is over. The most bullish estimates for PLTR stock project it to reach $500 within the next few years. That would be almost 3x the current price, but that may not be enough for growth investors.

At the same time, institutional investors are continuing to buy Palantir stock, which is likely to give it a higher floor.

As of this writing, the consensus price target for PLTR stock is around $175. For perspective, just one year ago, the consensus price target was $42.12.

A big reason for this stock's rise is Palantir’s inclusion in the S&P 500 and NASDAQ 100. It’s a “must-have” in many funds that follow those indexes. 

While many fund investors already have exposure to PLTR stock through index funds, a direct investment in Palantir carries more risk. For those considering a position, here are some concerns about Palantir and a perspective on what the future could hold. 

Is Palantir Too Dependent on Government Contracts?

Palantir generates about 55% of its revenue from government contracts, which include the U.S. Department of Defense (DoD). The concern here is twofold. First, it enhances the narrative that Palantir is a “black box” company. But second, it leads to concerns about future revenue.

Last year started with concerns about cuts from the Department of Governmental Efficiency (DOGE). However, those cuts didn’t materialize, and heading into 2026, the Trump administration is proposing an increase in defense spending.

Additionally, while 55% is still a substantial portion of the company’s revenue, this represents a sharp decline from just two years ago. It shows that Palantir has made significant strides on the commercial side of its business, while still being widely regarded as the operating system of the U.S. government. 

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Can Palantir Justify Its Premium Valuation as Growth Slows?

Palantir’s most significant assets include its proprietary software, a proprietary large language model (LLM), and a platform that’s baked into how its customers run their operations.

While valuable, many of these assets don’t appear as identifiable intangible assets on the balance sheet because much of the related spending is expensed as incurred, which can depress near-term profits. That dynamic—lower reported earnings even as the underlying capabilities grow—can help explain why Palantir’s price-to-earnings (P/E) ratio looks elevated.

Palantir’s earnings per share (EPS) growth will slow in 2026, but it is still likely to be over 20%, which is exceptional growth, even for a technology company.

Will Competition and IP Risks Pressure Palantir’s Advantage?

Near-term threats to Palantir include increased competition and IP risks. Companies such as Microsoft Corp. (NASDAQ: MSFT), Amazon.com Inc. (NASDAQ: AMZN) and Alphabet Inc. (NASDAQ: GOOGL) are offering increasingly sophisticated tools at scale. This is in addition to nimble AI-native platforms that may offer faster deployment at lower costs. If competitors replicate key functionality or undercut pricing, Palantir may face slower growth or margin pressure—even without outright IP loss.

On the commercial side, however, Palantir is well-protected against IP loss. The firm's core platforms (i.e., Gotham, Foundry, and AIP), are complex systems built over decades, making them difficult to copy outright. Much of its advantage lies not just in software, but in embedded workflows, data integration, and long-term customer relationships, especially in government and regulated industries. That reduces the immediate threat of direct IP theft.

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