Palantir Technologies Inc (NYSE:PLTR) shares dropped 6.18% after Michael Burry circulated a lengthy newsletter that questioned the prevailing investment cycle around artificial intelligence - a cycle that includes companies such as Palantir.
Burry, widely noted in financial circles for his prior prediction of the 2008 housing market collapse, published a roughly 10,000-word update to his Palantir thesis. The newsletter voiced broader reservations about the AI sector. While Burry's full critique was not disclosed in granular detail, the commentary appears to have honed in on matters such as data center depreciation and the current market valuations attached to AI-related firms.
In response, analysts at DA Davidson reviewed the entire newsletter and opted to retain their neutral stance on Palantir. In a research note, the firm wrote: "We read all 10,000 words in Michael Burry’s newsletter and found no new reason to worry about Palantir. We agree shares are expensive, hence the NEUTRAL rating."
DA Davidson went further to defend aspects of Palantir's business model and competitive positioning. The analysts argued: "We do not agree this is a problem for Palantir. Quite the contrary, the very reason Palantir is doing so much better than any software company is that Palantir is the rare company actually helping its clients achieve value from AI in its mission critical systems."
The DA Davidson team also posed rhetorical questions aimed at Burry's assessment: "Why is Palantir growing so much faster than any other software company at scale? How is it accelerating if it is not adding value? How is it doing so with high cash flow margins?"
Palantir positions itself as a specialist in data analytics software for government agencies and commercial customers. The company has emphasized its role in the enterprise AI market, promoting its AI Platform, or AIP, as a tool for organizations to deploy and operationalize artificial intelligence solutions within mission-critical systems.
Market reaction and analyst defense
The stock movement following Burry's newsletter reflects how high-profile investor commentary can influence market sentiment. DA Davidson's note underscores a counterargument: despite valuation concerns, the firm sees evidence that Palantir is generating differentiated, high-margin cash flow by translating AI into operational value for clients.
What remains unclear
The newsletter's full detail on the broader AI critique was not fully disclosed in public reporting, limiting what can be concluded from the statements alone. That omission leaves open the scope and depth of the specific issues Burry associates with the AI investment cycle beyond the cited concerns about data center depreciation and valuations.