Palantir Technologies Inc. (NASDAQ:PLTR) is a stock that Jim Cramer has, perhaps begrudgingly, shifted his opinion on. Throughout 2025, the CNBC TV was nothing short of unbridled optimism for the firm. Cramer asserted on multiple occasions that Palantir Technologies Inc. (NASDAQ:PLTR) was slated to benefit from the Trump administration's focus on cost-cutting and its ability to enable businesses to operate more efficiently. However, the shares are down by 6.3% over the past year. Cramer wondered whether Palantir Technologies Inc. (NASDAQ:PLTR)'s performance following its second-quarter earnings report and praised the release:
"After market buyers walking up Palantir like the old days.. But are the old days still viable?
"Palantir's numbers were amazing ..sometimes I wish they were a little more "res ipsa loquitur" but it was an enjoyable call for certain!"
Later, he also urged the bulls to take it higher:
"Ok just take Palantir up 50 already. come on"
Looks like Palantir Technologies Inc. (NASDAQ:PLTR)'s shares did trade like the "old days" Cramer mentioned. Since the earnings, they are up by a strong 26%. The results saw Palantir Technologies Inc. (NASDAQ:PLTR) post $1.94 billion in revenue and guide $8.15 billion and $8.158 billion in full-year revenue. The revenue figure beat analyst estimates of $1.8 billion, and the quarter was also marked by a 148% jump in commercial revenue and a 90% growth in government revenue. The growth in commercial revenue addressed a concern for Palantir Technologies Inc. (NASDAQ:PLTR) that was common last year.
With a forward P/E ratio of 84.03 that is significantly higher than that of peer firms such as IBM (18.98) and Microsoft (25) the key debate for Palantir Technologies Inc. (NASDAQ:PLTR) is whether the valuation is justified by its future prospects. Starting with the buls, even though the multiple is high, they believe it fails to capture the firm's potential. They point towards the second quarter revenue growth of 93% and outline that the firm commands a dominant position in the market for allowing businesses to implement artificial intelligence in their processes. Additionally, they point towards the firm's free cash flow to claim a healthy business.
However, the bears counter by outlining that while Palantir Technologies Inc. (NASDAQ:PLTR) is growing, its valuation multiples price in years of strong growth. This valuation, as per the bears, means that there is little room for disappointing financials. Additionally, the bears also worry that if the market faces any AI-related headwinds, then Palantir Technologies Inc. (NASDAQ:PLTR)'s close links to the sector could spell trouble for the stock. Additionally, there are also worries about competitors such as Microsoft and OpenAI building AI-implementation layers to eat the firm's market share.
Shifting to the hedge funds, 89 out of the 1,041 hedge funds part of Insider Monkey's Q4 2025 database had owned Palantir Technologies Inc. (NASDAQ:PLTR)'s shares. This figure grew to 96 out of the 1,022 in Q1 2026, indicating that perhaps hedge fund sentiment improved slightly. On the other hand, firms such as IBM and Snowflake had 59 and 80 hedge fund stakeholders in Q1. Short interest in the stock was 3.64% of the float, which was higher than Microsoft's 1.24% and lower than IBM's 3.90%. The largest hedge fund stakeholder was Arrowstreet Capital, whose $1.5 billion stake marked a 278% growth.
While Insider Monkey acknowledges the risk and potential of PLTR as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than PLTR that has 100x upside potential, check out our report about the cheapest AI stock.
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