Palantir Technologies has captured the imagination and capital of a significant segment of the retail investment community, transforming into a darling of the burgeoning artificial intelligence boom. Despite Wall Street’s persistent concerns regarding its valuation, individual investors have poured billions into the software company’s shares in 2025, positioning Palantir as a top-tier investment alongside established tech giants.
Data from VandaTrack reveals that retail investors are on track to invest nearly $8 billion in Palantir stock this year, representing an impressive surge of over 80% from the previous year and a more than 400% increase compared to 2023. This influx of capital has propelled Palantir to become the fifth most actively purchased security by individual investors in 2025, trailing only market heavyweights like Tesla, Nvidia, and the widely held SPDR S&P 500 ETF Trust (SPY).
“Palantir has been integrated into the narrative of AI-driven technology leaders,” observed Viraj Patel, deputy head of research at Vanda. “It’s been a remarkable performance.”
**An ‘Insane’ Business Model**
Since its public debut in 2020, Palantir has cultivated an aura of mystery due to its dual focus on government and commercial clients. The company’s core business revolves around helping large organizations, including defense agencies and major corporations, to effectively manage and analyze vast datasets. Beyond its perceived role as a beneficiary of the artificial intelligence revolution, Palantir has also been associated with initiatives aimed at enhancing federal government efficiency and bolstering national security.
“For a long time, there was a common refrain of ‘What does Palantir actually do?'” remarked Paxton Earl, an investment banker specializing in software who delved into the company’s regulatory filings. “After researching it, I realized, ‘This is genuinely an extraordinary business. It’s exceptionally well-executed.'”
Earl’s research uncovered a revenue stream more diversified than initially anticipated, extending beyond defense contracts. He noted Palantir’s engagement with well-known consumer brands such as Ferrari and Wendy’s, further illustrating the breadth of its commercial applications.
The company’s stock performance has been nothing short of spectacular. Palantir shares have surged over 150% year-to-date in 2025, marking its third consecutive year of triple-digit gains. Over the past three years, its stock has climbed by nearly 3,000%, vastly outperforming the S&P 500’s approximate 80% gain and the Nasdaq Composite’s more than 120% rise during the same period.
Palantir’s third-quarter earnings report in early November saw the stock experience a notable pullback, declining 16% as investors reassessed the valuations of AI-centric companies. This marked the stock’s worst monthly performance in over two years. While Wall Street attributed the sell-off to profit-taking and broader concerns about the sustainability of the AI trade, Vanda’s data indicates that the majority of retail buying activity occurred in the first nine months of the year, slowing down as anxieties surrounding a potential AI bubble grew.
**A Retail ‘Romance’**
Palantir has actively engaged with individual investors, a strategy that appears to be paying dividends. Unlike many corporations that limit Q&A sessions on earnings calls to institutional analysts and journalists, Palantir has opened its forums to retail investors. CEO Alex Karp, in a distinctive year-end video message from a ski slope, publicly acknowledged and expressed gratitude to these smaller shareholders.
“We are exceedingly grateful to all of you individual investors who took the time and opportunity, and had the courage, to look past conventional, rusty, crusty platitudes,” Karp stated, adorned in ski gear.
The stock has become a prominent topic on the popular Reddit forum, WallStreetBets. At various points in 2025, Palantir was the most frequently mentioned stock on the platform, according to Breakout Point, a firm that tracks meme stock trends.
“Palantir has been a long-standing fixture of the WallStreetBets community,” noted Ivan Ćosović, managing director at Breakout Point. “They have a deep affinity for it.”
**Institutional Hesitancy vs. Retail Conviction**
Despite the retail fervor, Wall Street analysts have maintained a more cautious stance. The consensus among analysts polled by LSEG is a “hold” rating, with many citing concerns over the stock’s elevated multiple.
Gil Luria, head of technology research at D.A. Davidson, described Palantir’s valuation as a “non-starter” for institutional clients. The company trades at a trailing earnings multiple of approximately 450 times, a stark contrast to the S&P 500’s average of around 28.
Luria suggests that retail investors are drawn to Palantir’s “ambitious” mission in national defense and are captivated by CEO Alex Karp’s ability to articulate a compelling vision, drawing parallels to Tesla’s Elon Musk, though without the same level of public controversy.
He further draws a parallel between Palantir’s current trajectory and Tesla’s market evolution a decade ago, when the electric vehicle manufacturer was presenting a forward-looking vision. Tesla’s stock has since seen a remarkable surge of roughly 3,000% over the past ten years, dwarfing the S&P 500’s more than 230% gain in the same period. The pertinent question remains whether the retail investors who championed Tesla a decade ago are now finding a similar opportunity in Palantir.
Luria acknowledges that Palantir’s recent financial performance has been strong. The company’s second-quarter report, which surpassed analyst expectations and led to an upward revision of its full-year guidance, prompted him to re-evaluate his own skepticism regarding the stock’s high valuation. “Even the most jaded, old, stodgy Wall Street analysts were taken aback by the level of success,” Luria commented. “It was such a staggering success that I had to reconsider everything I knew.”
Notably, Michael Burry’s Scion Asset Management, the now-dissolved fund run by the investor famed for “The Big Short,” had disclosed short positions against both Palantir and Nvidia in the third quarter. Palantir CEO Alex Karp famously dismissed Burry’s move as “bats— crazy.”
**Overvaluation or Inevitable Rise?**
Retail investors remain largely undeterred by the cautious outlook from institutional players. As Ćosović of Breakout Point observed, where Burry perceives “overvaluation,” the sentiment on WallStreetBets leans towards “destiny.”
Palantir has experienced significant price volatility throughout the year, with multiple instances of declines exceeding 10% within single trading days. However, for committed investors like Kyle Dijamco, a marketer based in Los Angeles, these fluctuations present opportunities to acquire more shares in a company they fundamentally believe in.
“You become somewhat desensitized to the price swings,” Dijamco shared, expressing his intention to invest thousands more dollars during the next significant market downturn. “I simply possess the conviction that it will perform exceptionally well.”
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