Michael Burry Questions Palantir's $300 Billion Valuation in New Bearish Call

Renowned investor Michael Burry has once again taken a critical stance on Palantir Technologies, publishing an extensive essay on Substack that outlines his concerns about the company’s sky-high valuation. His bearish thesis hinges on a detailed examination of Palantir’s financial history, business model sustainability, and questionable technology reliability. The analysis marks Burry’s formal response to the data analytics company’s remarkable ascent in recent years.

A History of Heavy Losses Before Going Public

Before Palantir’s direct listing in late 2020, the company carried a substantial accumulated deficit from its years as a private enterprise. When the firm filed its S-1 prospectus in summer 2020, the financial reality came into stark view: accumulated losses totaled $3.96 billion as of June 30, 2020. During 2018 and 2019 alone, Palantir burned through $1.2 billion.

The company’s funding strategy reflected its cash consumption challenge. Series K in 2019 represented a particularly massive capital raise at $11.38 per share, bringing in $899 million. To bridge gaps between rounds, Palantir relied on revolving credit lines. Notably, just before the direct listing in August 2020, the board granted Alex Karp, the company’s CEO, $1.1 billion in stock options—a move that Michael Burry views as emblematic of the firm’s profligate spending culture.

The AI Platform Bet: Growth vs. Reliability Concerns

Founded in 2003 as a Silicon Valley venture focused on defense and government work, Palantir pivoted toward broader commercial markets. In 2023, the company unveiled its Artificial Intelligence Platform, a system designed to integrate large language models from OpenAI and Anthropic with customer proprietary data. Since the AI Platform launch, revenue has expanded substantially. The company reported $4.5 billion in annual sales for 2024, representing 56% year-over-year growth. The stock itself has appreciated roughly 450% over the preceding two years, lifting Palantir’s market capitalization near $300 billion.

Yet Michael Burry argues the market has overlooked a critical weakness: the underlying AI technologies are “systematically unreliable” for mission-critical applications. He cites research from Stanford University documenting reasoning failures in large language models—particularly problematic when those systems must support legal reasoning, scientific analysis, medical decision-making, military targeting, or other functions demanding absolute precision. By relying on third-party AI models rather than proprietary technology, Palantir’s solution inherits these fundamental limitations, according to Burry’s analysis.

Geographic Disparities Point to Consulting Model, Not Pure SaaS

Michael Burry’s examination of Palantir’s regional revenue breakdown reveals a potential red flag for long-term scalability. U.S. commercial revenue surged 137% last year, but international commercial revenue increased merely 2%. This dramatic divergence suggests the business depends heavily on in-person engineering expertise and deep customer relationships on the ground—characteristics more aligned with consulting services than true software-as-a-service (SaaS) models.

Burry further argues that market pressure on executives to demonstrate AI adoption artificially inflates near-term demand for Palantir’s offerings. However, competitors like Salesforce and Microsoft possess deeper resources and could democratize data integration capabilities, eventually allowing sophisticated customers to develop solutions internally. Once companies recognize this reality, the rationale for Palantir’s premium pricing evaporates.

Why Michael Burry Predicts a Valuation Correction

Michael Burry concludes his analysis with an explicit forecast: Palantir’s current winning streak will not persist indefinitely. He predicts the company will eventually prove worth less than $100 billion—substantially below today’s $300 billion valuation. For investors who align with Burry’s outlook, the margin of safety appears favorable. For bulls betting on the AI narrative to continue lifting the stock higher, Michael Burry’s detailed bearish thesis represents a direct challenge to the prevailing optimism surrounding Palantir’s future trajectory.