There's a battle raging on Wall Street, and it's not between bulls and bears—it's between the professionals and the people. At the center stands Palantir Technologies, the AI and data analytics company that has become the most divisive stock in the market. Despite eye-watering valuations and institutional skepticism, retail investors have made Palantir their flagship holding, and they're showing no signs of letting go.

The Numbers That Should Terrify Investors

By any traditional valuation metric, Palantir is one of the most expensive stocks in the market. The company trades at a forward price-to-earnings ratio of approximately 260—more than 10 times the sector average of 24. At current prices, investors are betting on years of exceptional growth just to justify today's share price, let alone generate future returns.

Wall Street has noticed. RBC Capital analyst Rishi Jaluria maintains a Sell rating on the stock, predicting a downside of more than 70% from current levels. The overall consensus is lukewarm at best: three Buy ratings, eleven Holds, and two Sells. This is not the kind of analyst support that typically sustains a rally.

"At current prices, investors are betting on a long period of very strong growth and stable margins, leaving little margin of safety. The risk-reward is challenging."

— Wall Street analyst

The Institutional Exodus

Perhaps more telling than analyst ratings is what institutional investors are actually doing with their money. JPMorgan has reduced its Palantir position by more than 32%. T. Rowe Price cut its stake by nearly 24%. Overall institutional ownership sits at just 56.44%—remarkably low for a company of Palantir's size and prominence.

The "smart money" appears to be taking profits and reallocating to companies with more favorable risk-reward profiles. Yet every share they sell seems to find a willing retail buyer.

What Retail Investors See

To understand the Palantir phenomenon, you have to understand what retail investors see that institutions apparently don't—or won't.

The AI Platform (AIP) has been a genuine growth engine. In its most recent quarter, Palantir posted U.S. commercial revenue growth of over 121% year-over-year and more than 29% quarter-over-quarter. These are not the numbers of a company struggling to find product-market fit; they're the numbers of a company whose moment has arrived.

Defense contracts provide additional foundation. In September 2025, Palantir signed a £1.5 billion defense deal with the U.K. Even more significantly, the U.S. Army consolidated 75 contracts into a single 10-year arrangement with Palantir valued at $10 billion in August. NATO adopted Palantir's Maven Smart System for Allied Command Operations, marking a pivotal shift in global defense strategies.

The Retail Thesis

Retail investors argue that traditional valuation metrics don't capture what Palantir is becoming. If the AI Platform approaches an inflection point in enterprise adoption—and early evidence suggests it might—then current growth rates could accelerate rather than moderate. In that scenario, today's prices could look reasonable in retrospect.

There's also a narrative component. Palantir CEO Alex Karp has cultivated an image as an iconoclast—the kind of founder who builds transformational companies regardless of Wall Street's short-term concerns. Retail investors drawn to founder-led companies with controversial reputations (think Tesla in its early days) see a similar dynamic at play.

The 2025 Track Record

For now, the retail bulls have been vindicated by performance. Palantir shares gained 145% in 2025, making it one of the best-performing large-cap stocks in the market. Investors who bought despite Wall Street skepticism have been rewarded handsomely.

The question is whether past performance will repeat. Palantir has experienced significant volatility, including a 7% slip in December amid broader tech weakness. Government contract revenue, while stable, faces potential budget pressures. Commercial growth, while impressive, needs to continue at exceptional rates to justify the valuation.

What Comes Next

The Palantir story will likely be settled by execution. If the company can continue delivering triple-digit commercial revenue growth while expanding its defense footprint, the retail thesis may prove correct. If growth moderates to more typical enterprise software rates, the valuation will become increasingly difficult to defend.

For investors considering Palantir in 2026, the essential question is one of conviction: Do you believe the AI Platform represents a generational opportunity that justifies paying 260 times earnings? Or do you believe, as many institutions apparently do, that the stock has gotten ahead of even a very successful company's fundamentals?

The answer will determine whether Palantir's retail investors are visionaries who saw the future—or cautionary tales about the dangers of buying narrative over numbers.