Why Palantir Is Struggling (And What AI Has to Do With It)

The Big Picture

Imagine your favorite superhero suddenly showed up to a fight, and everyone started questioning whether the regular soldiers were still needed. That’s kind of what’s happening right now between a hot artificial intelligence company called Palantir and newer AI models that seem to be able to do parts of Palantir’s job — or at least, that’s what people are starting to worry about.

Palantir is a company that builds powerful software mainly for governments and large corporations to analyze enormous amounts of data. For a long time, investors thought Palantir was the perfect stock for today’s world of global tension and security concerns. But the stock has had a really rough year, and the reason connects to a much bigger story happening across the entire tech world.

How Bad Is Palantir’s Stock, Actually?

Let’s look at some quick numbers to understand:

• The broader tech software market (measured by an ETF called iShares IGV) has dropped about 14% since the start of the year.
• Palantir, which is actually one of the three biggest companies in that investment fund, has fallen about 33% in the same period.

So Palantir isn’t just struggling a little bit — it’s struggling significantly more than its peers. And the reasons go deeper than just normal market ups and downs.

The High Expectations Problem

Before we get into the AI story, it helps to understand one important detail: a lot of people used to expect incredible things from Palantir because of how much investors paid for the stock compared to the money it actually made.

Simple explanation: Think of it like buying a house. If you pay $10 million for a house that only earns $50,000 a year in rent, you’re paying a LOT compared to what you’re getting back. Over the past few quarters, the stock was priced extremely high relative to Palantir’s actual earnings and sales. Now, those high expectations are starting to come back down to earth.

The Real Problem: AI Might Be Able to Do Palantir’s Job

Here’s where things get really interesting — and a little scary for Palantir.

What Does Palantir Actually Do?

Palantir specializes in handling data-heavy workloads. That means it helps organizations (like the military, intelligence agencies, and big companies) take massive piles of messy information and turn it into something useful — like finding patterns, making predictions, or visualizing connections.

What’s Changing?

New AI models — especially large language models (LLMs) from companies like Anthropic and OpenAI — are getting surprisingly good at doing some of those same data-heavy tasks. And investors are starting to wonder: Do we still need Palantir if AI can do this stuff on its own?

John McPeake, a senior research analyst at Rosenblatt, put it this way in an interview with CNBC:

"I think there is this specter hanging out in the future of Anthropic being able to do everything or OpenAI being able to do everything. It’s having someone say, ‘Create me a Palantir,’ and it’ll magically appear."

In other words, people are imagining a future where you could just ask an AI to build you a Palantir-like system, and it would happen almost instantly. That might sound like science fiction, but these AI models are already being seen as powerful "code generators" that can potentially do almost anything — and that perception is weighing heavily on Palantir’s stock.

The Anthropic Blog Post That Made Things Worse

Earlier this month, Anthropic published a blog post about how its AI is getting better at data analytics — which is exactly the kind of work Palantir is known for.

Analysts at UBS (a major investment bank) read that post and said it "doesn’t sound great" for software companies like Palantir and Snowflake.

Karl Keirstead, an analyst at UBS, wrote about "rising investor concern" that Anthropic and OpenAI might turn their AI data capabilities into actual commercial products — products that customers could use instead of paying for Palantir.

In plain English: If Anthropic or OpenAI releases a product that does what Palantir does, customers might stop buying Palantir’s software and switch to the AI alternative instead.

Even Palantir’s Own Partners Are Worried

Here’s something that really shows how serious this is: Snowflake, a company that actually partners with Palantir and provides data management services that Palantir’s operating system relies on, admitted that there could be overlap between what AI models do and what data specialists do.

Christian Kleinerman, Snowflake’s head of product, said at an investor event on June 2:

"In many ways, I am seeing the dynamics with the AI model providers similar to what has happened with the cloud providers where, yeah, there may be some overlap. We’re more complementary than not at many customer sites, and so far it seems to be very similar dynamics."

He’s basically saying: Yes, AI companies might compete with us a little, but we think we’ll mostly work together rather than against each other. Still, the fact that he even had to address the overlap shows how real the concern is.

Palantir’s Own Customers Are Curious About AI Alternatives

At Palantir’s own conference (called AIPCon 10) in San Francisco in early June, one customer stood up and said something that probably made the Palantir team a little nervous:

"I’d like to explore building a parallel open source graph database or using OpenAI and Anthropic. I’m not sure if these will deliver the same outcomes but I hope they will. It would be great to have them come in and drop a package that we can use. We want to be open, but Palantir is not open."

This customer is essentially saying: We love what Palantir does, but we’re curious whether AI tools from OpenAI or Anthropic could do the same thing — and we’d prefer something more open and flexible.

Palantir’s CEO Fights Back

Alex Karp, Palantir’s CEO, has not been shy about pushing back against the idea that AI can replace his company. He called the notion a "farce."

In an interview with CNBC in early June, Karp said:

"You get to statements like ‘We’re going to replicate Palantir by doing a deploy code.’ I mean it’s a complete farce. It is not that large language models aren’t crucial for the world; it’s just the implementation is where the value is."

What he means: Karp isn’t saying AI is unimportant. He’s saying that the real value isn’t in the AI model itself — it’s in how you actually implement it in the real world, especially in complex, high-stakes environments like military operations or intelligence work. And that, he argues, is where Palantir’s expertise truly shines.

Investors Aren’t Waiting to Find Out

Despite Karp’s confidence, investors are already making moves based on their fears about AI making Palantir less relevant.

One notable example: Michael Burry, the famous hedge fund manager (you might know him from "The Big Short"), is shorting Palantir’s stock. That means he’s betting that the price will go down.

On June 25, Burry wrote on Substack:

"I covered half of my Palantir (PLTR) short at $107.15. I continue to hold puts."

This means he closed part of his bet at a profit but is still betting against the stock going forward.

But Not Everyone Is Bearish

On the other side of the debate, some investors think the market is being way too pessimistic about Palantir.

Dan Ives, head of technology research at Wedbush, told CNBC:

"The market is way mispricing what this demand trend is going to look like over the next six to nine months, what the monetization trends will look like on enterprise, and that goes from Microsoft to Oracle … and even some of the software names like Palantir."

His argument is that the ongoing buildout of AI infrastructure will actually create more demand for companies like Palantir, not less. As more companies adopt AI, they’ll need help managing and making sense of all the data — which is exactly what Palantir does.

Summary

Here’s everything we’ve covered in a nutshell:

• Palantir’s stock has dropped about 33% this year, significantly worse than the broader tech software market.
• The main reason is growing fear that AI models from companies like Anthropic and OpenAI could eventually handle the data-heavy workloads that Palantir specializes in.
• Even Palantir’s partners (like Snowflake) and its own customers are acknowledging the potential overlap and exploring AI alternatives.
• Palantir’s CEO Alex Karp strongly disagrees, calling the idea that AI can replace Palantir a "farce" and arguing that real-world implementation is where the true value lies.
• Some investors (like Michael Burry) are betting against the stock, while others (like Dan Ives) think the market is overreacting and that Palantir will benefit from the AI boom.
• The big question remains: Can AI models truly replicate what Palantir does, or is there something irreplaceable about Palantir’s approach to complex, high-stakes data work?

Frequently Asked Questions

1. What does Palantir actually do?
Palantir builds software that helps governments and large companies analyze massive amounts of data. Think of it as a super-powered tool for finding patterns, making decisions, and visualizing complex information — especially in areas like national security, defense, and intelligence.

2. Why is Palantir’s stock dropping?
The stock is falling mainly because investors are worried that new AI models (from companies like Anthropic and OpenAI) might be able to do some of the same data-analysis work that Palantir does, potentially making Palantir less necessary in the future.

3. Can AI really replace Palantir?
Palantir’s CEO says absolutely not — he calls the idea a "farce." He argues that while AI models are powerful, the real challenge is implementing them in complex, real-world situations, which is where Palantir’s expertise comes in. However, some analysts and customers aren’t so sure and are exploring AI alternatives.

4. Who is shorting Palantir’s stock?
Famous hedge fund manager Michael Burry (known from "The Big Short") is one notable investor betting against Palantir. He has covered part of his short position at a profit but continues to hold bearish bets on the stock.

5. Is there any positive outlook for Palantir?
Yes. Some analysts, like Dan Ives from Wedbush, believe the market is being too pessimistic. They argue that the growing AI infrastructure will actually increase demand for data management and analysis tools, which could benefit Palantir in the coming months.