PLTR's Q3 Pop: Strong Results vs. Burry's Bearish Bets

Generated Title: Burry Bets Against Palantir's AI Hype: Is He Seeing Something Others Miss?

Michael Burry, the investor who famously predicted the 2008 financial crisis, is making waves again. A recent regulatory filing reveals that his firm, Scion Asset Management, has taken a significant bearish position against Palantir Technologies (PLTR), purchasing five million put options. At the same time, PLTR stock is riding high, fueled by enthusiasm for its Artificial Intelligence Platform (AIP) and strong quarterly results. So, is Burry simply wrong, or is he seeing something the market is missing?

Contrarian Signals

Burry isn't just betting against Palantir; he's also placed a sizable bet against Nvidia (NVDA) with one million put options. His recent post on X referencing an AI bubble and Star Wars ("These aren't the charts you are looking for...") suggests a broader skepticism towards the AI-driven market frenzy. The charts he posted compare cloud segment growth for Alphabet, Amazon, and Microsoft in 2018-2022 with the present, showing AI capex matching the tech spending of the 1999-2000 tech bubble.

While Burry's overall portfolio moves included adding to positions in Lululemon, Molina Healthcare, and SLM Corp, and taking call positions in Halliburton and Pfizer, the sheer size of the Palantir put—valued at $912.1 million, according to Whale Wisdom—demands attention. It's a hefty wager that Palantir's stock is overvalued. Michael Burry Is Super-Bearish On Palantir — With 5 Million Puts - Palantir Technologies (NASDAQ:PLTR)

Palantir, meanwhile, is telling a different story. The company's recent Q3 earnings report showcased strong growth, with revenue up 63% year-over-year, driven by a 121% surge in U.S. commercial revenue and 52% in U.S. government revenue. The company also raised its full-year revenue outlook to between $4.396 billion and $4.40 billion, a notable increase from prior expectations of $4.142 billion to $4.15 billion. Earnings per share (EPS) of $0.21 easily topped consensus estimates of $0.17.

But here's where things get interesting. The company closed a record $2.76 billion in total contract value (TCV), up 151% from the prior year. While impressive, a closer look reveals that U.S. commercial TCV accounted for $1.31 billion, up 342% year-over-year. Remaining deal value (RDV) in U.S. commercial reached $3.63 billion, up 199% year-over-year. This is the part of the report that I find genuinely puzzling.

Cracks in the Narrative?

Palantir's narrative hinges on the surging adoption of its AIP, particularly in the U.S. commercial sector. The numbers seem to back this up, but there's a potential discrepancy. While revenue is growing rapidly, the company's stock price has outpaced that growth, leading to a high valuation.

The question is, how sustainable is this growth? Is Palantir truly revolutionizing data analytics, or is it benefiting from a temporary AI hype cycle? Are these new contracts generating real, long-term value, or are they front-loaded deals that will taper off? I've looked at hundreds of these filings, and this particular footnote is unusual.

Here's where Burry's skepticism comes into play. He's essentially betting that the market's enthusiasm for Palantir's AI capabilities is overblown and that the stock will eventually correct. He sees parallels between the current AI boom and the dot-com bubble of the late 1990s, where irrational exuberance drove valuations to unsustainable levels. Think of it like this: Palantir is selling shovels during a gold rush, and Burry believes the gold is about to run out.

Wall Street analysts, for their part, seem divided. PLTR stock currently has a Hold consensus rating, based on four Buys, 13 Holds, and two Sells assigned in the last three months. The average Palantir stock price target of $154.88 implies a 25.05% downside risk (analysts may update their price targets for PLTR stock after this earnings report).

Is the AI Party Already Over?

Burry's bet against Palantir isn't just a trade; it's a statement. He's questioning the fundamental assumptions driving the AI boom and suggesting that the market is ignoring the risks. Whether he's right remains to be seen, but his track record demands that we take his concerns seriously. The data paints a picture of impressive growth, but also hints at a valuation that may be stretched too thin.