Something doesn’t add up this week. The market’s celebrating another round of “AI beats” like it’s free money, while valuations look like they’ve been pulled straight from 2021. Palantir jumps on earnings, analysts cheer the numbers, and everyone nods along as if 260× forward earnings is the new normal. It’s not. This isn’t rational optimism — it’s momentum disguised as conviction.

When everyone’s chasing the same theme, I like to stop and ask: what’s being ignored? Beneath the noise, there’s a widening gap between business results and investor expectations. And that gap — not the headlines — is what determines who makes money next quarter. In today’s issue, I’ll dig into one company that perfectly captures this tension. It’s a reminder that hype is temporary, but math always settles the score.

This week’s focus: Palantir — the AI darling that’s starting to look dangerous.

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Every investor loves a good story — and Palantir just gave Wall Street one of its best yet.
Revenue up 62.8% year-over-year.
U.S. commercial growth exploding 121%.
Margins expanding to 33%.

It’s the kind of quarter that makes headlines, fuels Twitter threads, and gets retail investors rushing for the “buy” button.
But here’s what experience teaches you — the stories that sound perfect usually end badly.

And right now, Palantir feels less like a once-in-a-generation opportunity and more like a déjà vu moment from 2021 — when investors paid any price for a good narrative.
That’s why I’m not convinced.

Yes, the business is growing fast.
But at over 260× forward earnings, the stock isn’t just priced for perfection.
It’s priced for divinity.

Let’s cut through the noise and see what’s really going on.

Let’s start with what Palantir absolutely nailed this quarter.

CEO Alex Karp called it “unrelenting AI demand” and the “transformational impact” of AIP.

He’s not exaggerating.
Palantir has positioned itself at the sweet spot between data, analytics, and artificial intelligence — turning complex enterprise data into usable intelligence.

For years, its strength was in defense and intelligence work. But now?
Corporate America is knocking.
From healthcare and finance to manufacturing, companies are integrating Palantir’s AIP to power decision-making and predictive models.

That’s a huge shift — and it’s real.
The U.S. commercial business is now the growth engine, and that’s the best kind of problem for a company like Palantir to have.

Let’s be honest — these numbers are sexy.
Margins up, profits up, growth up.

But there’s a darker side: valuation.

At 262× forward P/E, Palantir is priced higher than nearly every major tech name — including Microsoft, Nvidia, and Snowflake.

Let that sink in.

You’re paying more for Palantir’s potential than for Nvidia’s actual dominance.
And that’s where the math stops making sense.

This stock is trading as if it will flawlessly execute for the next decade — no competition, no setbacks, no macro slowdown.
That’s not investing.
That’s faith-based finance.

Even Palantir bulls will tell you: the business is excellent, but the stock is walking on air.
When the narrative starts driving valuation more than earnings, you’re buying hope — and hope doesn’t compound.

Here’s where Palantir deserves real credit: it’s finally scaling what once looked unscalable.

This is exactly what long-term investors want to see — a company evolving beyond a niche defense contractor into a broad enterprise software platform.

But there’s a trade-off: growth of this kind takes customization, manpower, and time.
Palantir isn’t selling plug-and-play SaaS; it’s selling deep integration. That means growth will eventually slow as the company bumps into scalability limits.

And when growth slows — even slightly — the market will reprice the dream.

Why does a company with under $3 billion in annual revenue trade like a trillion-dollar juggernaut?

Because the market’s drunk on AI.

Everyone wants exposure. Everyone wants the next Nvidia.
And Palantir happens to be one of the few “AI pure plays” with a real product and real profits.

That’s why the market keeps bidding it up — even when logic says otherwise.

But here’s the uncomfortable truth: valuation still matters.
It always does.

At some point, buyers will stop paying 262× for growth that can’t stay triple-digit forever.
When that happens, momentum turns into quicksand.
And the same investors chasing today’s breakout will be the first to dump shares when growth slows to 30–40%.

That’s how hype cycles end — not with panic, but with silence.

Let’s test Palantir against the Rule of 40 — the golden metric for software companies.

Growth rate + profit margin ≥ 40%.

Right now, Palantir clears it easily:
~60% growth + 33% margin = 93%.

That’s elite.
But it also sets a trap.

Once you’re this far above the threshold, there’s only one direction left to go.
If growth slows or margins plateau, that score drops fast — and so does the multiple.

This is what I call the gravity effect.
When a company flies too high on perfect metrics, even small changes feel catastrophic.
Investors price in a fantasy, and reality eventually interrupts.

If you already own Palantir — congratulations. You caught a rocket.
But if it were my portfolio? I’d be trimming.

Here’s how I’d think about it:

Because right now, it’s all story.

This is the moment where smart investors get cautious — not greedy.
The numbers justify admiration, not acceleration.

Palantir triggers every investor bias known to man — FOMO, confirmation bias, narrative attachment.

AI! Government contracts! Explosive growth!
It sounds unstoppable.

But that’s exactly when seasoned investors step back.

Remember: losses hurt twice as much as gains feel good.
That’s how your brain’s wired.
And when valuations are this stretched, one bad headline or a slower guidance can erase months of paper gains overnight.

Markets don’t reward dreamers forever.
They reward realists who wait for emotion to drain from the price chart.

Mark Spitznagel, who made $1B in a single day during the 2015 flash crash, warns markets are mimicking 1929. Yeah, just another oracle spouting gloom and doom, right?

Vanguard and Goldman Sachs forecast just 5% and 3% annual S&P returns respectively for the next decade (2024-2034).

Bonds? Not much better.

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Lately, markets feel louder than ever. Every earnings call, every CEO quote, every headline has the same echo: AI will change everything. You can almost feel the collective adrenaline — investors chasing what’s hot, funds front-running momentum, retail piling in late. It’s intoxicating to watch, but also dangerous. When optimism becomes the default setting, that’s when I start to worry. Because markets don’t just correct numbers — they correct emotion.

I’ve seen this movie before. Hype always burns bright before it burns out. The investors who win aren’t the loudest; they’re the ones quietly taking profits while everyone else celebrates. Patience isn’t weakness — it’s strategy. Let others chase headlines and short-term validation. I’d rather wait for prices to cool, for emotion to drain, and for logic to return. Because when it does, value re-emerges — and that’s when the calm, pragmatic investor steps back in while the crowd looks away.