Michael Burry is betting Palantir's $420 billion valuation can't last, even after the company posted record-breaking growth. His latest move: long-dated put options targeting a dramatic price collapse.
Michael Burry, the investor known for his prescient bets against the housing market, has renewed his bearish stance on Palantir Technologies, even as the artificial intelligence and data analytics company delivered one of the most robust quarters in enterprise software history. Burry's skepticism comes at a time when Palantir's stock has surged 64% from its June low, pushing its market capitalization to roughly $420 billion, according to Yahoo Finance.
In early June, Burry described Palantir as a "sand castle" trading at 16 times its intrinsic value. The stock fell sharply after his comments, but quickly rebounded as Palantir reported second-quarter results that far exceeded Wall Street's expectations. For the quarter ending June 30, 2026, Palantir posted $1.935 billion in revenue, up 93% year-over-year, with U.S. commercial revenue jumping 149% and U.S. government revenue up 90%. The company's GAAP net income reached $1.062 billion, representing a 55% margin, and adjusted free cash flow totaled $1.22 billion. Palantir also raised its full-year revenue guidance to as much as $8.158 billion, projecting 82% annual growth.
Despite these headline numbers, Burry has doubled down on his short thesis. On August 10, he disclosed that he had purchased put options expiring in March 2027, with strike prices in the low-to-mid $100 range. He took advantage of a drop in implied volatility to rebuild his bearish position at lower option premiums. Burry's long-term view is stark: he believes Palantir's intrinsic value could ultimately fall below $1 per share, a dramatic contrast to its current price near $175.52.
Accounting Gaps and Off-Balance-Sheet Risks
Burry's critique has evolved beyond traditional valuation metrics. He now points to two accounting issues he argues are being overlooked by the market. First, he highlights Palantir's stock-based compensation (SBC) practices. Over the past year, the company issued 31.3 million shares to employees, worth about $5 billion-roughly six times the reported SBC expense. Burry contends this creates a significant gap between reported earnings and the true economic impact of dilution, making Palantir's profitability appear stronger than it is.
Second, Burry draws attention to Palantir's off-balance-sheet commitments. He notes that non-cancellable infrastructure purchase obligations have more than tripled this year, representing future cash outflows that do not show up in current earnings. These long-term commitments, he argues, could constrain Palantir's financial flexibility and are not fully reflected in the company's reported results.
Combining these factors, Burry maintains that Palantir's true economic picture is far less favorable than its headline numbers suggest. With the stock trading at 69 times sales, he sees little margin of safety for investors if growth slows or market sentiment shifts.
Market Momentum vs. Valuation Skepticism
Palantir's management has not shied away from touting its recent performance. CEO Alex Karp described the company's second quarter as "otherworldly," emphasizing that the business nearly doubled in size over 12 months. On the company's earnings call, Karp urged analysts to "forget consensus," arguing that no other business at Palantir's scale has grown as quickly.
Yet, the market's response has been mixed. Despite the company's rapid growth and strong cash flow, Palantir's year-to-date return is negative 1.77%, and its one-year return is negative 4.42%, based on Yahoo Finance data. This suggests that investors may already be pricing in a best-case scenario, with the stock's lofty valuation acting as a ceiling rather than a floor.
Burry's put options, which expire in March 2027, give him a multi-year window for his thesis to play out. If Palantir's valuation compresses, the options could become highly profitable. If the company continues to grow into its multiple without a price correction, the puts could expire worthless. The outcome hinges on whether Palantir can sustain its extraordinary growth and whether investors remain willing to pay a premium for its future prospects.
Broader Implications for Investors
Burry's high-profile short is part of a broader debate about how to value fast-growing technology companies in an era of AI-driven optimism. While Palantir's operational momentum is undeniable, the company's reliance on aggressive stock-based compensation and growing off-balance-sheet obligations raise questions about the sustainability of its reported profitability. For investors, the case highlights the importance of looking beyond headline growth figures to assess the underlying quality of earnings and the risks embedded in complex financial statements.
For those seeking to diversify away from concentrated bets on mega-cap tech stocks, some analysts have pointed to alternative strategies such as small-cap and international ETFs. As discussed in a recent analysis of S&P 500 concentration risk, these vehicles may offer broader exposure and help mitigate the impact of valuation extremes in a handful of dominant companies. One recent article explores how Vanguard's ETF lineup can help investors address this challenge.
Palantir's story is a reminder that even the most impressive growth narratives can face skepticism from seasoned investors. Whether Burry's bet pays off will depend on how the company's fundamentals evolve-and how much risk the market is willing to tolerate in pursuit of future gains.
Palantir's Q2 2026 earnings report showed total revenue of $1.935 billion, a 93% increase from the prior year, with U.S. commercial revenue up 149% and U.S. government revenue up 90%. The company's market capitalization reached approximately $420 billion as of August 2026, with a trailing price-to-sales ratio of 73.19 and a forward price-to-earnings ratio of 112.36, according to Yahoo Finance.
Stock-based compensation is a common tool for technology companies to attract and retain talent, but it can significantly dilute existing shareholders if not managed carefully. When companies issue large amounts of equity to employees, the reported earnings per share may not fully capture the economic impact of dilution. Investors should also pay attention to off-balance-sheet obligations, such as long-term purchase commitments, which can create future liabilities that are not immediately visible in financial statements. Understanding these mechanisms is essential for evaluating the true risk and reward profile of high-growth companies trading at premium valuations.
