Key Points
Palantir continues to crush expectations.
The market has priced in a lot of expected business growth into its stock.
Palantir (NASDAQ: PLTR) has been an interesting stock to own in 2026. Overall, it's still down for the year, but just barely. However, if you bought the stock in July, you're a happy investor, as it has undergone a major rally over the past few weeks. The question investors are now asking is whether this rally is sustainable or whether this is as good as it gets.
Image source: The Motley Fool.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Palantir's growth continues to accelerate
Palantir doesn't need to convince investors that it will benefit from some future use case for its technology; it's here right now and seeing major growth due to several commercial entities adopting its software, as well as further expansion of its government business. Palantir excels at integrating its tools with existing systems, allowing users to deploy analysis powered by artificial intelligence (AI). This is becoming wildly popular and is leading to some incredible growth rates for the company.
During the second quarter, Palantir's revenue rose 93% year over year. This rise was led by U.S. commercial client revenue growth of 149%. Even though Palantir and Wall Street projections regularly predict that its growth will slow down, it never does. As another bonus, Palantir is incredibly profitable, converting 55% of revenue into net income.
It doesn't really get a whole lot better than that, and I think Palantir is one of the top AI investments any investor can make, but there is one problem: valuation.
This is an incredible company posting strong results. The market is well aware of this, so it has given the company an unreal valuation. Palantir trades for nearly 110 times 2026 earnings estimates.
PLTR PE Ratio (Forward) data by YCharts.
That's a very high premium, and it tells investors that a lot of anticipated growth is already baked into the stock price. So where could Palantir stock go from here to the end of the year? I think it all hinges on what the company reports for Q3. These results won't be available until November. If Palantir continues to show revenue acceleration, I wouldn't be surprised if the stock rallies by another 10% or so to close out the year. But growth rates start to decelerate and management forecasts an even greater slowdown, the stock could sell off due to the high expectations currently priced into it.
There is far more downside potential than upside potential in Palantir's stock, which worries me. Many other AI stocks are growing at similar rates, yet are not valued at the same level. Those better bargains look like far more appealing investment options for the rest of this year.
Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.