If you missed Nvidia in 2016... (From Behind the Markets)
At a Glance
- Palantir has penetrated just 2% to 3% of its expanding addressable market, leaving significant runway for sustained double-digit growth.
- High gross margins and operating leverage position the company to convert incremental revenue into outsized profit as adoption scales.
- Despite bearish commentary and recent stock volatility, analyst price targets and AI-driven demand trends support the long-term bull thesis.
The broad sell-off in technology stocks has dragged down plenty of big names. Palantir Technologies (NASDAQ: PLTR) is no exception.
Following a gain of more than 136% in 2025, shares of PLTR are down more than 27% as of Feb. 12. For many investors, that kind of volatility turns the conversation back to the stock’s lofty valuation.
In the short term, the market is a voting machine, and traders are clearly giving PLTR stock a vote of no confidence.
But in the long term, the market is a weighing machine, and that’s why this reset looks like an opportunity for investors who can take a long position in the AI stock.
A key reason for this is that despite the tremendous growth the company has notched on both the commercial and government sides of its business, it still has only touched about 2% to 3% of its total addressable market (TAM).
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The Math Behind the Market
When Palantir first went public in 2020, the company estimated a global TAM exceeding $120 billion across government and commercial verticals. At that time, it had captured only about 2.4%. Five years later, TAM has expanded rapidly due to AI-driven demand in analytics, defense, and the commercial sector, undergoing a compound annual growth rate (CAGR) of around 25%.
Despite strong revenue growth in a deeper, more diversified market, Palantir’s share of its TAM remains in the low single digits. If the company were merely to double its share to 5%, that would imply a revenue base approaching $6 billion to $7 billion, still a modest fraction of market potential.
Accelerating demand for on-premise and classified AI systems will mean the TAM expands faster than Palantir’s ability to supply it, keeping upside structurally intact. So the big takeaway for investors is that if Palantir simply makes modest gains in TAM, it will be enough to generate double-digit growth for years to come.
Margins Built for Scale and Long-Term Growth
Part of Palantir’s attraction lies in its operating leverage. Gross margins above 75% and expanding adjusted operating margins—recently in the 30% to 35% range—signal that incremental revenue flows disproportionately to profit. As commercial momentum compounds, Palantir’s cost base should flatten relative to revenue, unlocking further scalability.
This structure supports a middle-innings growth narrative: Palantir is growing into an enormous market with durable economics rather than peaking at maturity. Investors should view margin resilience not as a defensive characteristic but as a platform for sustained compounding.
The underlying thesis for Palantir still rests on decades-long trends: the digital transformation of defense, the institutionalization of AI analytics, and the expanding utility of real-time data orchestration.
With only a small fraction of its TAM penetrated and expanding profit potential, Palantir remains a structurally advantaged player early in its growth curve rather than late in its cycle. Market volatility may obscure the view, but the math and the company’s margins keep the long-term bull case firmly intact.
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A Word About Michael Burry
It would be irresponsible to write an article about PLTR stock with it down over 27% year-to-date without mentioning a key reason. That is, Michael Burry, former manager of deregistered hedge fund Scion Asset Management, and his bearish commentary about Palantir.
Burry does not believe the company’s current winning streak will continue, with some of his latest speculations including:
- Palantir stock dropping as low as $46 per share.
- Palantir’s market cap dropping below $100 million dollars.
By his own admission, much of Burry’s criticisms are based on anecdotal information from an unnamed former company staffer and other information that he couldn’t independently verify. Another part of his bearish thesis has to do with the company’s heavy reliance on stock-based compensation. This critique has been leveled at Palantir since it went public in 2020.
Notably, Burry is not actively shorting PLTR stock. But investors may recall that the company's shares dropped after it was revealed that Burry’s now-defunct hedge fund had $912 million in bearish put options on the company’s stock.
The bear case seems thin, but it could trigger fear in investors who may be holding PLTR stock in spite of its lofty valuation. That means the bottom may not yet be in for Palantir.
However, the company's latest earnings report showed anything but a company that’s slowing down. Plus, analysts (other than Burry) continue to raise their price targets for PLTR. The consensus price target is now $191.05, which would be a gain of over 47% from the stock’s closing price on Feb. 12.
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